ECB President Christine Lagarde Demands Separate Framework for Crypto Lending
Global regulators have been on their toes amid major amid major liquidity crisis faced by Celsius Network and the insolvency risks faced by crypto-focused hedge fund Three Arrows Capital (3AC).
On Wednesday, June 22, European Central Bank (ECB) president Christine Lagarde shared her opinion demand stricter scrutiny and a separate framework for the working of the crypto lending platforms.
Lagarde expressed her thoughts during her testimony before the European Parliament earlier this week. The ECB President spoke about the current macroeconomic conditions and inflation fears while also drawing the parliament’s attention to the unsettling activities taking place in the crypto staking and lending market.
Christine Lagarde has asked the European Union to collectively undertake crypto regulatory efforts in this regard. The EU is already working on a regulatory package through Markets in Crypto-Assets (MiCA). However, Lagarde coined a new term MiCA II referring to crypto staking and lending.
She added: “MiCA II should regulate the activities of crypto-asset staking and lending, which are definitely increasing. Innovations in these unexplored and uncharted territories put consumers at risk, where the lack of regulation is often covering fraud, completely illegitimate claims about valuation, and very often speculation as well as criminal dealings.”
Expressing her point-of-view, Lagarde mentioned the decentralized finance (DeFi) market saying that it poses a “real risk to financial stability”. Thus, she stressed the need of covering DeFi into MiCA II. Talking about the world’s largest crypto, Lagarde said: “Bitcoin will not be covered by MiCA I. But hopefully for MiCA II, you will take that into account.”
ECB President Christine Lagarde has been a vocal critic of public cryptocurrencies. Amid the market crash over the last month, Lagarde said: “My very humble assessment is that [#crypto] is worth nothing, it is based on nothing—there is no underlying asset to act as an anchor of safety.”
While European regulators have been vocal critics of crypto, the European Commission is all committed to bringing the Digital Euro CBDC to the market by 2023.
While as European regulators swing into action, the U.S. Securities and Exchange Commission (SEC) has also been initiating discussions to introduce greater regulatory scrutiny for the crypto market.
On Wednesday, June 22, Fed Chairman Jerome Powell also said that they are tracking the crypto market events “very closely”. During his meeting with the U.S. Congress Powell stressed that digital financial products “are quite similar to products that have existed in the banking system or the capital markets but they're just not regulated the same way. So we need to do that."
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