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Crypto And Defi Could Pose “Real Risks” To Financial Stability – Regulation Bitcoin News

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

Lagarde on crypto regulation

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

We believe that crypto assets and decentralized finance (defi) have the potential to pose real risks to financial stability at the outset of this work in relation to crypto assets and the risk associated with them.

“This would be particularly the case if the rapid growth of crypto asset markets and services continues… and intensifies interdependence with both the traditional financial sector and the broader economy,” the ECB chief added.

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

Lagarde went on to speak about the Markets in Crypto Assets Regulation (MiCA) bill. She stressed that the European Systemic Risk Board (ESRB), of which she chairs, supports “the need for rapid adoption and implementation” of the MiCA.

The ECB chief noted that she was encouraged by MiCA’s progress. However, she added that on her understanding it “won’t be implemented before 2024”, which she stressed is “still a long way off”.

Lagarde then proposed some additional provisions to the current MiCA law. Referring to the MiCA bill with additional provisions as MiCA2, she stated that MiCA2 “should address the risk of interconnectedness in relation to financial institutions’ exposure to crypto assets”.

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

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

Kevin Helms

As an Austrian economics student, Kevin discovered Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open source systems, network effects and the interface between economics and cryptography.

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