European Systemic Risk Board calls for limiting leverage in cryptocurrency trading

The European Systemic Risk Board (ESRB), led by the head of the European Central Bank, Christine Lagarde, urged limit the amount of leverage in cryptocurrency trading. The ESRB has published a report analyzing the potential risks to the financial stability of the EU associated with crypto assets.

The ESRB report notes that crypto trading is characterized by high volatility, low liquidity and weak regulation. This creates conditions for speculative transactions using a large leverage, which can exceed 100:1. Such transactions amplify fluctuations in the price of cryptocurrencies and can lead to significant losses for investors and service providers.

The ESRB proposes to introduce limits on the amount of leverage in crypto trading at the EU or national level. In addition, the council recommends strengthening the oversight of companies associated with crypto assets and requiring them to regularly report on risks and performance.

The European Systemic Risk Board (ESRB) is the macroprudential oversight body for the EU financial system, established in 2010 in response to the financial crisis. Its task is to analyze potential systemic risks to the financial stability of the EU and issue recommendations for their prevention or mitigation. The ESRB is led by being part of the European Financial Supervisory System (ESFS).

In April of this year, the European Council agreed on the rules (MiCA) for the regulation of the crypto industry, which establish clear regulatory principles and requirements for the use of cryptocurrencies and related services and activities in the EU.

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