Christine Lagarde, President of the European Central Bank (ECB), has stated the need to regulate the crypto lending sector.
La Présidente de la BCE appelle à un MICA 2 pic.twitter.com/umywn7k99g
— Aurore Lalucq (@AuroreLalucq) June 21, 2022
During her speech to the European Parliament, Lagarde drew attention to the growing activity of crypto lending platforms. In her opinion, this trend requires additional regulatory efforts on the part of the authorities.
The head of the ECB referred to the MiCA cryptocurrency regulation bill adopted by ECON in March 2022. In her opinion, due to current events in the industry, there is a need for “MiCa II” to oversee digital asset staking and lending.
“Innovation on these uncharted and unexplored territories expose consumers to risk, where lack of regulation often leads to fraud, outright illegal valuation claims, and very often speculation,” Lagarde said.
She added that decentralized finance poses “a real risk to financial stability.” Therefore, the sector should fall within the regulatory perimeter, concluded the head of the ECB.
Lagarde's statement was made against the backdrop of negative developments in the industry. On June 13, crypto lending platform Celsius suspended withdrawals, exchanges, and transfers between accounts “due to extreme market conditions.”
According to experts, the firm's decision may have been caused by losses when using high-risk DeFi instruments, in particular, synthetic assets backed by stETH from Lido and Wrapped Bitcoin.
Later, rumors about the insolvency of the Three Arrows Capital hedge fund (3AC), which actively used protocols like Aave.
One of the largest cryptocurrency lenders and asset managers in the Asian region – Babel Finance – announced a lack of liquidity due to market volatility and the suspension of payments and withdrawals from own products.
How the Celsius, 3AC and stETH issues will affect the price of Ethereum and the cryptocurrency market
Recall that in May, Lagarde called for the regulation of digital assets, noting that they are “worthless”.
Formerly President The ECB stated that all cryptocurrencies and stablecoins meet the definition of speculative assets and the recognition of currencies in them is inappropriate.
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