Is a Crypto Clampdown Coming? European Financial Watchdog Calls for Tighter Regulation!
The European System Risk Board has called for stricter regulation of the cryptocurrency sector, emphasizing the need for more oversight on decentralized finance and smart contracts, despite the current minimal impact on traditional finance.
The European System Risk Board (ESRB), the financial supervisory authority within the European Central Bank, has called for more rigorous crypto regulation. A recent report recommends closer monitoring of digital currencies, pinpointing decentralised finance (DeFi) and smart contracts as areas of particular interest. Despite acknowledging the minimal impact of the digital currency sector on traditional financial systems, the ESRB noted a growing interconnection and stressed the importance of understanding this evolution for maintaining financial stability.
The current regulatory framework, the Markets in Crypto Assets (MiCA) act, provides standardisation for stablecoins and cryptocurrency across Europe, but lacks specifics on DeFi and smart contracts. Despite the European Central Bank previously urging immediate attention to this law, the ESRB has a less pressing stance, emphasising the need to manage potential risks as the crypto industry emerges from a downturn. The report suggests enhancing EU-wide understanding of exchanges and vigilantly observing market trends, with a focus on operational resilience to safeguard users from exchange failure, lending activities, and digital asset staking.
