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ECB Chief Lagarde: Crypto and Defi Could Pose ‘Real Risks’ to Financial Stability

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European Central Bank (ECB) President Christine Lagarde says crypto assets and decentralized finance (defi) could pose “real risks” to financial stability. She has several regulatory proposals to supplement the European Crypto Assets Market Regulation (MiCA) bill.

Lagarde on regulation of cryptocurrencies

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ECB President Christine Lagarde spoke about the regulation of cryptocurrencies at a hearing at the European Parliament’s Committee on Economic and Monetary Affairs on Monday. She said:

As we embark on this work in relation to crypto assets and the risk they pose, we believe that crypto assets and decentralized finance (defi) can pose real risks to financial stability.

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“This will be particularly relevant if the rapid growth of crypto-assets and services markets continues… and the interconnection with both the traditional financial sector and the broader economy increases,” the head of the ECB added.

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However, she noted, “For now, links between private sector crypto assets and traditional finance remain limited – for now.”

Lagarde continued talking about the Crypto Asset Market Regulation Bill (MiCA). She stressed that the European Systemic Risk Board (ESRB), which she chairs, “supports the need for rapid adoption and implementation” of MiCA.

The head of the ECB noted that she was encouraged by the progress of MiCA. However, she added that her understanding is that this “will not be implemented until 2024”, which she stressed is “far away”.

Lagarde then proposed some additional provisions to the current MiCA bill. Referring to the MiCA bill with additional provisions as MiCA2, she explained that MiCA2 “should take into account the risk of interconnectedness in relation to the exposure of financial institutions to cryptoassets.”

It should also “completely cover decentralized finance (defi)” and regulate crypto staking and lending activities, she said. The head of the ECB noted that the current MiCA bill does not cover bitcoin, but she hopes it will be covered in MiCA2.

What do you think of the comments of ECB President Christine Lagarde? Let us know in the comments below.

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Credit : news.bitcoin.com

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