Christine Lagarde calls for stronger safeguards to protect European investors amid rising competition from U.S. and Asia
European Central Bank (ECB) president Christine Lagarde has urged policymakers to tighten oversight on stablecoins issued outside the European Union, warning that foreign digital currencies could undermine financial stability if not properly regulated.
Speaking at the European Systemic Risk Board’s annual conference, Lagarde emphasized that while the EU’s Markets in Crypto-Assets (MiCA) framework provides robust protections, gaps remain when non-EU issuers operate in European markets.
The risks of foreign-issued stablecoins
Lagarde argued that joint issuance of stablecoins by EU and non-EU entities creates regulatory blind spots. “Issuers should not be allowed to operate in the EU unless there are robust equivalence regimes at the source,” she said, stressing that investors must be guaranteed the ability to redeem holdings at par value.
She warned that in the event of a run, investors would naturally turn to the jurisdiction with stronger safeguards — likely the EU — but reserves held locally may not cover surging demand.
Stablecoins are digital assets designed to maintain a stable value, usually pegged to fiat currencies like the U.S. dollar or the euro.
U.S. stablecoin law adds pressure
The warning comes just weeks after the U.S. Congress passed the GENIUS Act, establishing a comprehensive regulatory framework for stablecoins. Analysts expect the law to boost U.S.-pegged issuers, potentially pulling liquidity and deposits away from Europe.
ECB board member Piero Cipollone previously cautioned that U.S. policies could result in “further losses of fees and data, euro deposits moving to the United States, and a stronger role for the dollar in cross-border payments.”
While the U.S. and EU refine their frameworks, reports suggest China is considering a yuan-backed stablecoin to complement its digital yuan program. Such a move would position China as a direct competitor in the global stablecoin market.
Experts say the next two years will be critical. “The question is no longer whether stablecoins will shape the future of payments, but which region will set the standards,” noted one European policy analyst.
For the EU, ensuring parity, redemption rights, and fully backed reserves will be essential to safeguard financial stability while competing globally.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.