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EU Watchdog Proposes Bans on Crypto Leverage to Safeguard Financial Stability

CryptoEU Watchdog Proposes Bans on Crypto Leverage to Safeguard Financial Stability

The European Systemic Risk Board (ESRB) has called for a prohibition on leveraged bets on crypto assets to prevent market shocks from threatening financial stability across the EU. The ESRB’s recommendations also encompass mandatory reporting from crypto-related entities and enhanced regulations for major industry players. With recent crypto market volatility, including Bitcoin’s sharp price drop and FTX exchange challenges, the ESRB warns of potential rapid systemic risks. The ESRB suggests introducing leverage limits for crypto-exposed investment funds, increasing collateral requirements for DeFi products and stablecoins, and curbing cryptocurrency companies’ ability to lend tokens to customers to limit leveraged speculation. While not legally binding, these proposals are likely to influence forthcoming versions of the Markets in Crypto Assets Regulation (MiCA) in the EU.

By FCCT Editorial Team

Disclaimer: The views expressed in this article are independent views solely of the author(s) expressed in their private capacity.

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