Christine Lagarde, President of the European Central Bank (ECB), announced the need to regulate the cryptocurrency lending industry.

In his speech to the European Parliament, Lagarde drew attention to the increasing activity of crypto lending platforms. According to him, this trend requires additional regulatory efforts on the part of the authorities.

ECB chief refers to bill on regulation of cryptocurrencies Micaaccepted ECON in March 2022. According to him, due to current events in the industry, “MiCa II” is needed to oversee the staking and lending of digital assets.

“Innovation in these unmapped and unexplored regions exposes consumers to risk, where a lack of regulation often leads to fraud, outright illegal valuation claims, and often speculation,” Lagarde said.

He added that decentralized finance poses “a real risk to financial stability.” The ECB chief therefore concluded that the industry must remain within the regulatory framework.

Lagarde’s statement came against the backdrop of negative developments in the industry. On June 13, crypto lending platform Celsius suspended withdrawals, swaps and transfers between accounts “due to extreme market conditions”.

According to experts, the firm’s decision may be due to losses incurred when using high-risk DeFi tools, especially collateralized synthetic assets such as stETH from Lido and Wrapped Bitcoin.

Then there were rumors that the hedge fund Three Arrows Capital (3AC), which actively uses protocols like Aave, went bankrupt.

Babel Finance, one of the largest cryptocurrency lenders and asset managers in the Asian region, has announced a lack of liquidity due to market volatility and the suspension of payments and withdrawals from its own products.

Recall that in May Lagarde called for the regulation of digital assets, reminding them that they are “worthless”.

Earlier, the ECB Chairman said that all cryptocurrencies and stablecoins meet the definition of speculative assets and the recognition of currencies in them is inappropriate.

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