European Central Bank (ECB) President Christine Lagarde has urged European Union lawmakers to tighten regulatory requirements for foreign-issued stablecoins operating within the bloc.
Speaking at a European Systemic Risk Board (ESRB) conference in Frankfurt, Lagarde stressed that overseas issuers should fully comply with the EU’s standards before offering services to European users.
Stablecoin runs and EU safeguards
Lagarde warned that in the event of a stablecoin run, investors would likely redeem tokens in jurisdictions with stronger consumer protections – such as the EU, where the Markets in Crypto-Assets (MiCA) framework prohibits redemption fees. This, she argued, could leave local reserves vulnerable to depletion if safeguards are not harmonized across borders.
“The risk of liquidity mismanagement across jurisdictions is one we have seen before,” Lagarde said, drawing parallels to banking groups that are required to maintain reserves locally under rules like the net stable funding ratio and liquidity coverage ratio. She noted that multi-issuance stablecoin schemes could replicate these same vulnerabilities within a single entity if not properly regulated.
Preventing arbitrage and ensuring stability
Lagarde emphasized that robust oversight is essential to prevent regulatory arbitrage, where issuers exploit weaker rules in certain regions while operating in stricter markets like the EU. Ensuring uniform safeguards, she said, is critical to preserving financial stability as stablecoins grow in scale and systemic importance.
The comments underscore Europe’s cautious stance toward digital assets, even as MiCA positions the EU as a global leader in crypto regulation. With stablecoins seen as both a payment innovation and a potential systemic risk, Lagarde’s message was clear: foreign issuers must play by Europe’s rules or risk being shut out.
