(Bloomberg) -- The European Union should step up the monitoring of digital currencies to prevent a situation where crypto crises like the collapse of the FTX exchange can pose a systemic risk, a key European lawmaker said.

The crypto spillover risk is small at the moment, but the market has grown exponentially, said Irene Tinagli, a member of the European Parliament. 

“We need to be very carefully monitoring what is going on, and try to put in place regulation that would prevent that to blow up out of proportion and to become a systemic threat,” Tinagli, who chairs the Economic and Monetary Affairs Committee, said in an interview Tuesday on Bloomberg Television. 

The bloc has reached a preliminary agreement on its first major crypto regulation proposal, known as Markets in Cryptoassets, or MiCA, which would address supervision of service providers, as well as consumer protection and environmental safeguards for cryptoassets such as Bitcoin and Ether. A final vote on the directive is scheduled for February. If it goes through, the EU will be the first large jurisdiction to have such regulations in place.

Tinagli said it’s unclear whether MiCA could have prevented the collapse of crypto exchange FTX Group, adding that the matter will be discussed Wednesday during a public hearing in her committee. 

“We are still trying to understand and discover what really happened and if the tools that we have negotiated just a few months ago and that we are about to vote in the plenary would have been sufficient, “ she said. 

However, even if the directive wouldn’t have prevented FTX’s bankruptcy, it’s important to adopt a gradual approach now by putting the rules in force, she said. 

“It’s important to have something in place now,” Tinagli said in a separate interview, noting that reopening negotiations at this stage would lead to a delay of at least a year. “It won’t be wise to reopen MiCA because it is a good piece of legislation”

--With assistance from Jorge Valero.

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