Lagarde calls for broader crypto regulation following FTX collapse

Lagarde calls for broader crypto regulation following FTX collapse
  • The head of the European Central Bank, Christine Lagarde, said that broader crypto regulation beyond MiCA was needed after the collapse of the FTX exchange.
  • A European Central Bank digital currency will offer EU citizens alternative digital payment options, Lagarde told lawmakers in the European Parliament.

European Central Bank President Christine Lagarde called for more regulation on cryptocurrencies following the collapse of cryptocurrency exchange FTX, raising doubts about the broader digital asset market. The “stability and reliability” of cryptocurrencies “has recently been exposed in the most obvious way,” Lagarde said during an appearance before the European Parliament, responding to questions from policymakers concerned about the impact of the FTX crash on the bill, which will be passed early next year and will come into force in 2024, will cover parts of crypto and service providers. The application of MiCA will make Europe a “first mover in this world of great inventiveness and great size,” said Lagarde. 

“There will need to be a MiCA II,” Lagarde added, as part of a bid to introduce more robust cryptocurrency surveillance. Europe aspires to be a leader in this regard. Lagarde has previously pushed for a so-called MiCA II to expand the provisions of the landmark framework. In June, he proposed that MiCA II include risk-generating links to traditional finance and crypto activities outside the scope of MiCA, such as decentralized finance.

Lagarde added that the ECB would offer EU citizens digital payment alternatives. The ECB chief told members of the European Parliament’s Economic Affairs Committee that the central bank’s digital euro would offer EU citizens a digital payment system. That must be something we can provide, or someone else will take over. The ECB’s digital euro project is in the works as the central bank works with partners on a prototype. The decision to proceed with the implementation will be made in September 2023.

The European Commission will also “soon” propose legislation on a central bank digital currency.

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