European Central Bank head calls for regulation to focus on Bitcoin and DeFi

In response to a market crash that has captured the attention of people all around the globe, cryptocurrency staking and lending may ultimately come under the jurisdiction of regulatory authorities alongside Bitcoin.

During her appearance before the European Parliament on June 21 one week after cryptocurrency lender Celsius suspended all withdrawals, Christine Lagarde, president of the European Central Bank, became the first person to expressly demand greater oversight of the practice.

Lagarde stated that a possible second, follow-up framework was already required due to the rapid pace at which current advances in the sector are taking place. She was referring to the Markets in Crypto-Assets (MiCA) law, which is scheduled to go into force throughout the EU by 2024.

“MiCA II should regulate the activities of crypto-asset staking and lending, which are definitely increasing,” she stated in her function as the head of the European Systemic Risk Board (ESRB). 

Lagarde warned: 

“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.”

ECB believes DeFI poses a risk for financial stability 

It’s worth mentioning that Lagarde believes that decentralized finance (DeFi), which has the potential to pose a “real risk to financial stability,” should be fully covered in a second regulatory framework in addition to financial intermediaries. 

In this manner, the most prominent cryptocurrency in the world, Bitcoin, which does not have a single definable issuer, would fall under this framework in the future too.

“Bitcoin will not be covered by MiCA I,” she said, “but hopefully for MiCA II, you will take that into account.”

Notably last month the European Central Bank head slammed crypto assets saying they are ‘worth nothing’ and are ‘highly speculative.’