A Swedish export company with income in dollars, but paying out wages and taxes in kronor, must exchange dollar income for kronor. The company transfers the foreign exchange risk to the bank, by selling dollars for kronor. This can be done in two ways: either the company sells the dollars when it receives them, on the spot market, or it sells its future dollar income as soon as it receives an order, on the forward market. In both cases the bank buys dollars and thus takes over the foreign exchange risk. The bank also makes a charge for doing this. Today the margins in foreign exchange trading are 0.02 per cent. The bank's foreign exchange risk thus increases, unless another client happens to make an equally large foreign exchange transaction in the opposite direction at exactly the same time, ensuring that the bank's holdings of various currencies remains unchanged. This is, of course, very unlikely. The export company's foreign exchange transaction therefore gives rise to several transactions between banks, with the aim of distributing the foreign exchange risk throughout the banking system. This means that the clients' purchases and sales of various currencies and in various banks are matched against one another, to avoid an increase in the total risk in the banking system. The first foreign exchange transaction will therefore lead to many new transactions before all of the banks have once again achieved a healthy level of risk taking.
However, if MiCA is a regulatory milestone, it deserves to be complemented in the next few years with additional requirements. Indeed, MiCA partially covers crypto-asset service providers that combine multiple functions and activities in different jurisdictions, so-called crypto conglomerates. To improve this coverage, it is notably crucial to limit and control the concentration of activities in these conglomerates through strict governance requirements and to enhance investor protection by addressing conflicts of interests and reinforcing redemption rights and the protection of reserves. In addition, MiCA does not cover the DeFi ecosystem and its challenges in terms of regulation, given its specificities. To do so, I believe that we should not try to replicate existing financial regulations at all costs, but draw inspiration from regulations in other sectors to regulate for instance "products" even when their "producers" or "issuers" are not clearly identified. Furthermore, we have to recognise technical specificities and pay particular attention to the three layers that schematically constitute DeFi, namely, infrastructures, applications and access gates. To contribute to the development of that extension of MiCA, we recently published a discussion paper outlining possible avenues for regulation. This document is open for consultation on the ACPR website and we encourage industry stakeholders to provide their input. 2) The challenge of international coordination for an effective and global regulatory framework That being said, these regulatory issues are global, which means that we need to ensure that national regimes are consistent with each other in order to avoid any risk of regulatory arbitrage.