EU Financial Stability Watchdog Expresses Concerns Over Crypto Conglomerates and DeFi Targets

European Regulators Warn Against Risks of Crypto Lending and Staking

As the new Markets in Crypto Assets regulation (MiCA) is set to take effect in the European Union in 2024, regulators are warning of the risks associated with crypto lending and staking, as well as high leverage in digital asset markets. The European Systemic Risk Board (ESRB), chaired by EU central bank chief Christine Lagarde, issued a report on Thursday highlighting these concerns.

The report stated that crypto activities such as lending and staking pose systemic risks due to the potential for large losses from market volatility, liquidity risks, and operational risks. In addition, the ESRB warned of the high leverage used in crypto asset trading, which could lead to increased financial instability in the event of a market crash.

The ESRB recommended that regulators take a proactive approach to addressing these risks, including implementing requirements for crypto asset service providers to hold capital and applying limits to leverage. They also advised that regulatory oversight should be extended to non-bank entities involved in crypto activities.

As the crypto industry continues to grow, with increasing institutional adoption and mainstream acceptance, it is clear that regulators will need to keep up with the evolving landscape to ensure financial stability and protect consumers.

J-S Tremblay
About the author - J-S Tremblay

I've been involved in the cryptocurrency world since 2016 and trading since 2019. I started Moon and Lambo in 2021. I'm passionate about crypto and love to share my knowledge. I hate bankers and I hope that cryptocurrency will change the financial world for the better. View full profile...

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