Christine Lagarde, President of the European Central Bank, said that stablecoin issuers outside the European Union (EU) should be held to the same strict standards as those within the bloc. She warned that looser rules elsewhere could create risks, including potential financial instability if investors rush to redeem their holdings during a crisis.
Lagarde shared her views at the European Systemic Risk Board’s annual conference on Wednesday. She stated that MiCA mandates EU-based stablecoin issuers to hold significant reserves in bank deposits and ensure investors can redeem holdings at full value.
However, she warned of vulnerabilities in arrangements where EU and non-EU entities jointly issue stablecoins.
Risks of Looser Rules for Non-EU Stablecoin Issuers
MiCA’s strict rules apply only to stablecoin issuers in the EU, which means companies outside the region can operate under looser regulations. In a crisis, investors could rush to cash in their EU stablecoins, which are protected from fees, but the EU’s reserves might not be enough to cover everyone.
Lagarde stated that the EU should block such schemes unless non-EU countries implement equivalent rules and safeguards for cross-border asset transfers. She emphasized that international coordination is essential, warning that weaker regulations elsewhere could pose significant financial risks.
MiCA, fully implemented last year, establishes comprehensive regulations for crypto assets across the EU. Lagarde’s remarks come as stablecoins become increasingly important, especially with the U.S. taking a more crypto-friendly approach under the U.S. President Donald Trump.
In April, the Federal Reserve signaled a shift in U.S. policy by allowing banks to participate more freely in crypto and stablecoin activities. At the same time, Lagarde stressed the need for stricter rules in the EU to manage risks, protect investors, and maintain financial stability.
Also Read: Stablecoins May Spark Costly Bailouts, Warns Economist Jean Tirole
