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The European Systemic Risk Board (ESRB) has published a report addressing the systemic implications and policy options for crypto-assets and #DeFi within the #EU, warning that the current regulatory landscape has gaps that must be addressed.
#CryptoRegulation
#CryptoRegulation
The ESRB identifies 3 key priorities for mitigating risks:
1️⃣ Enhancing EU's capacity to monitor potential contagion risks between #crypto and traditional finance: this involves standardising reporting and disclosure requirements for institutions with exposure to crypto-assets.
1️⃣ Enhancing EU's capacity to monitor potential contagion risks between #crypto and traditional finance: this involves standardising reporting and disclosure requirements for institutions with exposure to crypto-assets.
2️⃣ Assessing the risks posed by crypto-conglomerates and leveraging crypto-assets: the ESRB highlights risk transmission channels and the potential negative outcomes related to the combined crypto-asset services within a single legal entity.
The report suggests regulating leverage in both traditional finance and DeFi contexts.
3️⃣ Fostering greater cooperation and information exchange among authorities: This focuses on addressing operational resilience, effectively regulating #DeFi and its interconnectedness, and monitoring crypto-asset lending and staking activities.
The report pinpoints several concerns under each priority area:
1️⃣ Operational resilience encompasses the complexities of applying basic principles for Financial Market Infrastructures and the vulnerabilities of the technology underpinning crypto-assets.
1️⃣ Operational resilience encompasses the complexities of applying basic principles for Financial Market Infrastructures and the vulnerabilities of the technology underpinning crypto-assets.
2️⃣#DeFi regulation challenges stem from rapid growth, inherent automation, volatility, and widespread operational risks.
3️⃣ Crypto-asset lending and staking require increased monitoring due to potential risks for consumers and their contribution to leverage in the crypto market.
It is evident that regulatory concerns endure despite the impending #MiCA regulations. In the EU, further regulatory action will likely draw from developments led by international standard setters.
Reviews and evaluation reports for #MiCA are planned as early as 18, 24, and 48 months after its entry into force.
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