ECB president calls for crypto regulation following FTX crash

The call was made by Christine Lagarde during a hearing of the Committee on Economic and Monetary Affairs of the European Parliament on 28 November 2022. Lagarde drew a parallel with Facebook’s Libra and offered it as a positive example of the ECB’s involvement, but she also noted that FTX’s situation is different and should be treated as such. 

FTX’s dealings with crypto assets instead of stablecoins brought up the issue of stability and reliability of the exchange. In this context, it was argued that the ECB should step up as a global regulator to address people’s increasing interest in digital assets. 

Christine Lagarde also mentioned the potential necessity of a MiCA II framework. According to iflr.com, the Markets in Crypto Assets bill is the first all-encompassing effort to tackle crypto assets and brings rules contained in Mifid, Market Abuse, and the Prospectus Regulation to the crypto asset industry. At the time of writing, MiCA has passed through all the stages of the EU's legislative process, except for approval in the European Parliament. 

MiCA II would build on the work lawmakers did for the original bill and would help regulate the activities of crypto asset staking and lending.

JPMorgan outlines potential changes in the crypto industry

In response to the FTX collapse, global investment bank JPMorgan has published a report in which it details some of the most significant changes it expects to occur in the crypto industry. The company’s analysts expect to see an increase in investor and regulatory pressure on crypto entities to disclose more information about their balance sheets. 

• According to JPMorgan strategists cited by news.bitcoin.com, the European Union’s Markets in Crypto Assets (MiCA) bill should receive final approval before the end of 2022, and the regulation should come into effect in 2024.
• The report touched on the debate among US regulators concerning the classification of cryptocurrencies as either securities or commodities.  
• Regulation-wise, new regulatory initiatives focusing on the custody and protection of customers’ digital assets could emerge. 
• The unbundling of broker, trading, lending, clearing, and custody activities as in the traditional financial system might also be of interest to regulators, as would the regular reporting and auditing of reserves, assets, and liabilities across major crypto entities. 
• The report also mentioned decentralized exchanges and how they might face some difficulties until decentralized finance (defi) becomes mainstream. 

JPMorgan notes that, following the FTX debacle, many retail crypto investors have already moved their cryptocurrencies to self-custody using hardware wallets. According to the report, the primary beneficiaries post-FTX collapse are institutional crypto custodians.