ECB Chief Calls For Tougher Crypto Regulation After FTX Collapse
European Central Bank President Christine Lagarde has called on lawmakers to start working on new crypto regulations to protect the financial system after the FTX exchange collapsed.
Lagarde reiterated his previous call for MiCA II to regulate activities related to staking and lending of crypto assets. The term refers to a complementary legislation building on the work done by lawmakers for the initial bill, the Crypto-Asset Markets (MiCA) Regulations.
Reflecting on FTX’s sudden implosion, the ECB chief said the incident was more about the “stability and reliability” of the exchange. Still, it shows the need for proper crypto regulation before digital assets cause greater economic damage. Lagarde also worried that crypto could grow to the point of becoming a financial stability risk.
Speaking as Chairman of the European Systemic Risk Board (ESRB), Lagarde said that “the FTX case clearly shows the dangers involved in a completely unregulated crypto market and unlicensed crypto exchanges. We still have a large number of crypto-asset service providers whose concept is not comprehensible. MiCA solves exactly this problem. With a global MiCA, the FTX crash would not have happened.
His statements follow a tumultuous period for the crypto markets in which Sam Bankman-Fried’s crypto empire filed for bankruptcy and owed creditors up to $50 billion. Almost five million FTX users are also waiting to get their money back.
“At least Europe on the road to crypto regulation is leading the pack. But as I said before, it’s a step in the right direction. That’s not it – there will have to be a MiCA II, which more broadly embraces what it aims to regulate and oversee, and that is very much needed,” she added.
Earlier this month, Christine Lagarde said the European Commission was preparing to publish a legislative proposal defining the legal status of the digital euro and determining its privacy features in the near future.
Lagarde added that a digital euro could encourage financial inclusion among underserved communities by bypassing barriers including transaction fees and documentation requirements.
The news comes after the European Parliament’s Economic and Monetary Affairs Committee voted last month to advance a version of the highly controversial Crypto Asset Markets Bill, or Mica. The bill is now heading for final negotiations with the European Commission, the Council of the European Union and the European Parliament.
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