The president of the European Central Bank (ECB) Christine Lagarde calls for more robust crypto regulation in the European Union following the implosion of the FTX Derivatives Exchange.
During the Committee on Economic and Monetary Affairs of the European Parliament which was held on Monday, Lagarde said that crypto regulation is an ‘absolute necessity’ now that the Bahamas-based exchange has crashed.
The ECB executive is skeptical about the larger digital asset market. Speaking to policymakers about the implications of the FTX implosion, Lagarde said that the “stability and reliability” of crypto “has been exposed in the most obvious way recently.”
While she reiterated that the EU has made giant strides in terms of regulation with the incoming Markets in Crypto Assets bill (MiCA), which is currently making its way through the European Parliament, Lagard opined that a broader regulatory framework is required.
“At least Europe is ahead of the pack [in terms of regulation],” Lagarde said. “But as I said previously, it’s one step in the right direction. This is not it — there will have to be a MiCA II, which embraces broader what it aims to regulate and to supervise, and that is very much needed.”
More Regulation to Clampdown Unreliable Crypto Projects
To emphasize the work of the ECB, Lagarde cited the digital currency project started by Facebook. Meta, Facebook’s parent company, introduced a centralized blockchain-based permissionless payment system that will run with a United States dollar-pegged stablecoin called Diem. The platform planned to use stablecoin to minimize the cost of sending money across international borders.
Shortly after, the project was terminated and sold to Silvergate Capital Corporation. ECB made sure to stop several crypto industry juggernauts from getting involved in that project. In comparison to now-bankrupt FTX, Lagarde claims that the situation is quite different because it is more about the stability and reliability of the industry.
With the increasing interest and demand for crypto offerings amongst investors, Large says that ECB needs to play a vital role. Additionally, there are plans to introduce an alternative digital payment method like a euro central bank digital currency (CBDC). For now, it is still under a two-year investigative phase.