Christine Lagarde, president of the European Central Bank (ECB), expressed her belief that there needs to be more monitoring placed on this area of the cryptocurrency lending market.
Christine Lagarde discussed the rising lending and staking of crypto-assets during her evidence before the European Parliament on Monday, June 20. She also discussed the impending inflation in Europe and around the world.
According to Lagarde, this development necessitates further regulatory efforts from the European Union (EU). She even created the phrase “MiCa II” to refer to the significant regulation package currently navigating the legislative process, Markets in Crypto-Assets (MiCa):
“MiCA II should regulate the activities of crypto-asset staking and lending, which are definitely increasing.”
Lagarde foresaw the dangers that this market segment’s lack of control would bring:
“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.”
Decentralized finance (DeFi), which was brought up separately by the official, is seen as posing a “serious risk to financial stability” and as such needs its own regulatory structure.
Staking is a Proof-of-Stake (PoS) protocol procedure that attracted the attention of the head of the ECB. It enables multiple crypto token holders to pool in their tokens, granting the staking pool operator a validator status and compensating all stakeholders with tokens for their computational resource contributions.
Lagarde is renowned for her outspoken opposition to cryptocurrencies and repeated assertions that they are “worth nothing” and “based on nothing.” In the interim, the European Commission declared that it is drafting a proposal for a digital euro for 2023. By the end of 2023, the ECB should have a prototype, and if all goes well, it might be released in 2025.