EU Watchdog Proposes Crypto Trading Leverage Limits

EU Watchdog Proposes Crypto Trading Leverage Limits


European regulators are proposing to introduce limits for crypto exchanges and investment funds in order to curb leveraged bets on digital assets and protect the financial stability of the industry, following the recent approval of the Markets in Crypto-Assets (MiCA) legislation.

EU regulatory authorities continue to work on new measures to be able to set up new regulations for the cryptocurrency industry and protect the interest of retail players. As per the latest development, European regulatory authorities are looking to curb leveraged bets on digital assets by introducing limitations for exchanges, financing funds, etc.

In a statement on Thursday, May 25, the EU watchdog stated that it is working to stop shocks that would jeopardize the financial stability elsewhere. The European Systemic Danger Board made plenty of recommendations ranging from asking all cryptocurrency corporations to submit regular reports likewise as introducing specific regulations for some of the largest players in the space. In its report, the ESRB said:

“Systemic dangers could arise quickly and suddenly. If the rapid growth trends observed in recent years were to continue, crypto-assets could pose dangers to financial stability.”

Consequently, they have proposed several  changes to the recently passed MiCA regulations such as “introducing leverage limitations for financing funds exposed to crypto-assets”. In addition, the ESRB likewise was known for limiting the cryptocurrency firm’s capacity to lend crypto tokens to its clients, which has been one of our  trending ways of making high-leveraged bets. Furthermore, the ESRB requested for setting up high collateral requirements for distributed finance products and stablecoins.

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EU And Its MiCA Laws

This development comes just 10 days after the EU Council approved the Markets in Crypto-Assets (MiCA) legislation. The member states of the EU and the European Parliament have collectively adopted MiCA regulations which make sure that cryptocurrency enterprises seek authorization from the EU to serve customers within the bloc.

In addition, these enterprises should likewise comply with protections to prevent issues of money laundering or terror financing. The EU has come up with MiCA regulations eventually  after a major shakeout in the cryptocurrency space and some high-profile collapses happening last year.

The past few recommendations from the ESRB are not bindings but rather shall inform the EU’s future work on the new versions of its cryptocurrency assets regulation (MiCA).

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