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 add to the bill to regulate European crypto-asset markets (MiCA).
Lagarde on cryptocurrency regulation
ECB President Christine Lagarde spoke about regulating cryptocurrencies at a hearing of the European Parliament’s Economic and Monetary Affairs Committee on Monday.
“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 ECB chief added.
However, she noted, “At the moment, the links between private sector crypto-assets and traditional finance remain limited – for now.”
Lagarde went on to talk about the bill to regulate crypto-asset markets (MiCA). She stressed that the European Systemic Risk Board (ESRB), which she chairs, “supports the need for rapid adoption and implementation” of MiCA.
The ECB head said she was encouraged by the MiCA’s progress. However, she added that it is her understanding that it “will not be implemented until 2024,” which she stressed is “a long way away.”
Lagarde then offered some additional provisions to the current MiCA bill. Referring to the MiCA bill with additional provisions as MiCA2, she explained that MiCA2 “should address the risk of interconnectedness with respect to financial institutions’ exposure to crypto-assets.”
It should also “fully cover decentralized finance (defi)” and regulate cryptocurrency staking and lending, she said. The ECB head noted that the current MiCA bill does not cover bitcoins, but she hopes it will be covered in MiCA2.