European Central Bank President Christine Lagarde has urged for stricter requirements on stablecoins issued outside the EU during a conference in Frankfurt.
Stricter Requirements for Foreign Issuers
Lagarde emphasized that foreign issuers of stablecoins should operate under "robust equivalence regimes" to be allowed in the EU. This is due to the regulatory frameworks established under the Markets in Crypto-Assets Regulation (MiCA). Stablecoins must be fully backed by reserves, and issuers are prohibited from charging redemption fees.
Risks to Financial Stability
Lagarde pointed out a key vulnerability: if a stablecoin is issued both inside and outside the EU, investors could rush to redeem in Europe during a crisis. "In the event of a run, investors would naturally prefer to redeem in the jurisdiction with the strongest safeguards," she stated. Such a scenario could strain reserves and trigger financial instability.
Global Stablecoin Race
Lagarde’s comments highlight the accelerating global race for stablecoins. While the U.S. Congress has passed legislation establishing a federal framework for stablecoins, China is reportedly exploring a yuan-backed stablecoin, illustrating the competition between global currencies and their roles in digital payments.
Lagarde's remarks suggest that the EU may take additional regulatory measures on stablecoins, potentially reshaping liquidity flows and reinforcing the euro's role in the digital economy.
