The European Union’s (EU) Financial Stability Watchdog has warned that growing crypto assets (virtual currencies) and decentralized finance (DeFi) may come to pose systemic risks to the economy, warning that large-scale crypto New regulations covering asset conglomerates and smart contracts may be needed, he said.
The European Systemic Risk Board (ESRB), chaired by European Central Bank (ECB) President Christine Lagarde, has announced that the new Crypto Market Regulation (MiCA) will come into force in the EU in 2024. Earlier, in a May 25th report, I warned of the risks of high leverage in cryptocurrency lending, staking, and the cryptocurrency market.
Among policy options, “DeFi developers could be required to comply with specific regulations covering the design and creation of smart contracts,” the report said. Possibilities include mandating code audits, restricting intellectual property akin to the pharmaceutical industry, and rules for “Oracle” sending real-world data to automated software.
MiCA sets governance, licensing and reserve requirements for players like wallet providers and stablecoin issuers, while excluding areas like cryptocurrency lending and staking. But the report warns that these areas pose “significant risks to consumers.”
According to the ESRB, under MiCA companies must manage conflicts of interest between their businesses, while identifying and mitigating operational and reputational risks that may arise from trading or providing services such as custody. There are no blanket requirements.
“Given market developments and experience gained in applying MiCA, the activities of crypto-asset conglomerates in the EU should be investigated,” the report said, urging supervisors to separate high-risk services into separate companies. It cites existing settlement laws that can be enforced on
“The past year has been a turbulent one for crypto and DeFi, but the systemic impact has not materialized,” the report said, noting that “exponential growth dynamics” are a predictor of future turmoil in 2008. He added that it suggests the possibility of posing a big threat similar to the Lehman shock.
In March, the ESRB suggested that fintech firms could face bank-like lending cap regulations to prevent the cryptocurrency market from overheating, citing the growing popularity of cryptocurrencies. was
｜Translation: coindesk JAPAN
｜Editing: Toshihiko Inoue
| Image: Christine Lagarde, Chairman of the European Systemic Risk Board (ESRB). (ECB/Flickr)
｜Original: Crypto Conglomerates, DeFi Targets of EU Financial Stability Watchdog Concerns