The President of the European Central Bank, Christine Lagarde, has advocated for regulations and supervision in the crypto sector. Lagarde has said that these regulations have become an “absolute necessity” following the collapse of the FTX cryptocurrency exchange.
ECB President calls for regulations and supervision of crypto
Lagarde was speaking on November 28 at a hearing of the Committee on Economic and Monetary Affairs of the European Parliament. She noted that the European Parliament had been successful in some of its regulatory efforts, such as halting the operations of Facebook’s Libra project.
She also added that the situation with the FTX exchange paid more attention to the stability and reliability of crypto exchanges. Unlike Facebook’s failed Libra project, the FTX exchange involved crypto assets, not just stablecoins. Therefore, the ECB needed to create a global regulatory framework to address the growing interest in digital assets.
The ECB President also commended Europe, saying it was leading in cryptocurrency regulations. “This is not it – there will have to be a MiCA II, which embraced broader what it aims to regulate and to supervise, and that is very much needed,” Lagarde added.
Europe has been termed one of the regions that have made the greatest effort to regulate the fast-growing cryptocurrency market. The Markets in Crypto Assets bill (MiCA) proposal is awaiting final approval if it passes the legal and language checks by EU legislatures.
The Economics Committee at the European Parliament endorsed the MiCA regulatory framework in October after talks between the EU Council, the European Commission, and the European Parliament. There are expectations that the policy will be effective in 2024.
According to Lagarde, there is a need for MiCA II. This could be about additional legislation built out of the original bill. Lagarde opines that the regulatory framework needs to regulate activities related to crypto staking and lending, as these activities have increased significantly.
FTX collapse attracts attention in Europe
Lagarde is not the only official in the European Union that has expressed concerns after the collapse of FTX. Stefan Berger, a member of the economics committee at the European Parliament, is also a big supporter of the MiCA regulatory framework. Berger has also said that the collapse of FTX creates more need to have the MiCA regulatory framework in place.
At the time, Berger said that the situation with FTX showed a danger in unregulated cryptocurrencies, and cryptocurrency exchanges needed a license to continue operating.
“We still have a large number of crypto asset service providers whose concept is not understandable. MiCA addresses exactly this problem. With a global MiCA, the FTX crash would not have happened,” Berger added.
The ECB is also currently looking into the creation of the digital euro. The bloc has engaged in a two-year investigative phase into its central bank digital currency (CBDC). Some EU officials expect that the legislation related to the digital euro will be complete in 2023.
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