Crypto staking and lending must be regulated —Christine Lagarde

LAGOS (CoinChapter.com) — European Central Bank (ECB) president Christine Lagarde has once again called for regulating digital assets in Europe, urging lawmakers to put tighter scrutiny in place to protect European consumers.

In detail, Lagarde, a known critic of Bitcoin and other digital assets, gave the charge while speaking before the European Parliament. She reiterated her stance toward digital assets noting that tighter restrictions must be enacted to curtail the excesses of the crypto industry.

The ECB boss argued that digital assets are scarcely defined under the proposed Markets in Crypto-assets (MiCA) regulation. Hence, she charged the lawmakers to strictly regulate the activities of digital assets, including staking and lending, in future legislation.

“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.”

Christine Lagarde said.

Notably, the MiCA regulation is a legal framework that focuses on how digital assets should operate within the European Union. Although the current regulation proposed under MiCA focuses on financial institutions and does not apply to cryptocurrencies.

However, in her address, Lagarde implied that the law was too lenient and proposed a more stringent law termed “MiCA II.” She suggested that MiCA II should regulate the activities of crypto-asset staking and lending, which are “definitely increasing.”

DeFi Pose Real Risk To Financial Stability, Christine Lagarde says

The ECB President extended her regulatory demand to decentralized finance (DeFi). Lagarde posited that DeFi poses a “real risk to financial stability” and should also be regulated by the E.U.

However, Peter Kerstens, European Commission advisor on technological innovation, digital transformation, and cybersecurity, noted that the European Commission isn’t currently looking to regulate DeFi.

“We’re currently not on track to regulate DeFi because it’s very rare to have something truly decentralized. But this could change.”

Kerstens said.

He also disclosed that although discussions aren’t ongoing, the current proposals would likely include NFTs. He indicated that the European Commission has “many bad ideas” about regulating DeFi, and “no good ideas.”

Notably, Christine Lagarde’s demand comes a week after several crypto lending platforms suspended withdrawal options for their users. Celsius initially announced its plan to pause withdrawals, and days later, Babel Finance also paused withdrawals citing liquidity pressures.

Over Regulation Kills Innovation, Expert Says

In a parallel development, crypto experts have reacted to the proposed MiCA regulation and Christine Lagarde’s 2.0 suggestion. While speaking at the founders of Brussels Blockchain Week, Darius Rugys, a partner at Maven 11 Capital, called for caution.

He argued that over-regulation would kill developer appetite, which invariably kills innovation. Meanwhile, Laura Chaput, head of regulatory compliance at Keyrock, noted that a clear regulatory framework is good for the industry.

Steven Robben argued that the biggest risk to the stability of the financial markets is central banks, not cryptocurrencies. Additionally, he posited that the traditional financial system is scared of losing control hence the clamping down on digital assets.