During a hearing this Monday in Brussels, Christine Lagarde spoke of the desire to move towards new cryptocurrency regulations, called Mica II.
On Monday, the second hearing of Christine Lagarde, the President of the European Central Bank (ECB), took place before the MEPs of the Economic and Monetary Affairs Committee (Econ) at the European Parliament in Brussels.
Currently, two texts aimed at regulating the regulation of cryptocurrencies (Mica for “Markets in Crypto-Assets” currently under discussion) as well as TFR (for Transfer of Funds Regulation).
During the hearing, MEP Aurore Lalucq questioned Christine Lagarde on the financial stability impact of crypto-crashes as well as the links “between regulated and unregulated finance”.
“Crypto-assets and decentralized finance have the potential to create a real risk for financial stability given the rapid growth of services and crypto-assets,” said Christine Lagarde during this hearing. “For the moment, the links between crypto-assets and traditional finance remain very limited. The European Systemic Risk Board wishes to quickly implement a regulation of crypto-assets which everyone knows as Mica”, added the latter, who called her Mica I.
Mica I is not expected to be implemented before 2024. “It’s a long way off when you think about the speed at which market values evolve. We wanted to go in the direction of those who have the will to regulate these assets “, said Christine Lagarde.
“What about a Mica II?”
The latter therefore asks this question “what about a Mica II?” Thanking MEPs for their work on Mica I, the President of the ECB considers that Mica I has a “too narrow” definition on the regulation of crypto-assets, calling for consideration of a new regulation called Mica II.
What would this regulation consist of? Christine Lagarde first cites the risk of interconnections with financial institutions and their exposure to crypto-assets.
“Mica II should regulate the activities of crypto-assets that make loans. There is also the issue of decentralized finance which focuses on financial intermediaries and where there is no such financial intermediary, the legislation does not apply, this is the case for bitcoins which would not be covered by Mica I. We hope that Mica II will take this into account. Mica II should regulate the questions of crypto-assets when there is no has no identifiable issuers, this is the case for bitcoin”, specifies Christine Lagarde.
For the President of the ECB, Mica II would have “a broader scope” which would make it possible to regulate “this uncharted territory which puts consumers in danger”.
“It is a pleasure that we welcome the last words of Ms. Lagarde when she talks about a new work of reflection around a MiCA 2 in order to broaden the spectrum and regulate the largest possible part of the crypto sector, nevertheless still once, we are advocating for a reopening of regulations and guidelines,” Aurore Lalucq told BFM Crypto.
“The texts we are working on, and particularly the MiCA regulation, are precisely intended to protect both consumers and investors. It is more than ever necessary to move quickly and get them into effect. Even if they will not be enough”, adds the latter.
Last month, Christine Lagarde explained that the cryptocurrencies “are worthless” in the Nederlands. At the same time, the institution published a very critical note vis-à-vis the sector.
“The nature and size of crypto-asset markets are changing rapidly, and if current trends continue, crypto-assets will pose risks to financial stability. If the interconnection between unbacked crypto-assets and the financial sector traditional has developed considerably, the interconnections and other contagion channels have so far remained sufficiently weak”, considers the ECB.
The institution said it was very critical of two areas: platforms that allow investors to achieve record leverage, and those that offer loans in decentralized finance.