A week after the major American crypto lending platform Celsius had to freeze the withdrawal option for its users, European Central Bank (ECB) president Christine Lagarde voiced her conviction on the necessity of tighter scrutiny over this part of the crypto market.
During testimony before the European Parliament on Monday, Lagarde expressed her thoughts not only about the looming inflation in Europe and around the globe but also about the increasing activities of crypto-asset staking and lending.
A procedure, which caught the ECB head’s attention, staking is available on a proof-of-stake (PoS) protocol and allows multiple crypto token holders to pool their tokens, thereby granting the staking pool operator a validator status and rewarding all stakeholders with tokens for their computational resources’ contributions.
ECB chairman Christine Lagarde thinks that crypto staking and lending should be regulated to avoid fraud. He also warns about the lack of regulation in markets.
He says “Innovations in these unexplored and uncharted territories put consumers at risk, where the lack of regulation is often covering fraud, completely illegitimate claims about valuation, and very often speculation as well as criminal dealings”
Decentralized finance is a threat to financial stability thus it should be covered by a separate regulatory framework.