European Central Bank President Christine Lagarde expressed concerns about stablecoins and their impact on financial stability within the European Union.
Liquidity Issues
Lagarde stated that stablecoins could pose serious liquidity risks unless policymakers close loopholes that allow foreign issuers to skirt EU rules. She highlighted that multi-issuance schemes could leave European investors exposed, stating, 'In a crisis, investors would naturally prefer to redeem in the jurisdiction with the strongest safeguards.'
Need for International Cooperation
Lagarde emphasized that 'international cooperation is indispensable' and urged policymakers not to allow multi-issuance schemes to operate in the EU unless supported by robust equivalence regimes in other jurisdictions. The ECB warns that Europe's financial stability might be threatened due to the increasing pressure from new crypto assets promoted by the U.S. administration.
Growth of the Stablecoin Market
The stablecoin market has grown by over $80 billion since the start of the year, with the sector's capitalization climbing from around $204 billion in January to $285 billion as of September 4. This growth follows the signing of the GENIUS Act by U.S. President Donald Trump, establishing the first comprehensive federal regulatory framework for stablecoins in the U.S.
Christine Lagarde calls for enhanced cooperation and measures to address the risks associated with multi-issuance schemes in order to safeguard the financial stability of the European Union.
