The European Union’s financial stability watchdog has said that new regulations may be needed to cover large crypto conglomerates and smart contracts, as it warns that a growing digital asset and decentralized finance (DeFi) sector may come to pose a systemic risk to the economy.

With the new Markets in Crypto Assets regulation (MiCA) set to take effect within the bloc in 2024, the European Systemic Risk Board (ESRB), chaired by EU central bank chief Christine Lagarde, warned in a Thursday report of the risks of crypto lending and staking, and of high leverage in digital asset markets.

Under one policy option, “DeFi developers could be required to abide by specific regulations covering the design and creation of smart contracts,” the report said. It floats the possibility of mandatory code audits, pharmaceutical-style intellectual

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