The President of the European Central Bank (ECB), Christine Lagarde, expressed the need to strengthen regulation for non-European stablecoin issuers. She called for improved oversight to minimize risks to financial stability arising from the involvement of issuers from other jurisdictions.
This is reported by Business • Media
Regulatory Gaps and Market Risks
During the ESRB conference, Lagarde emphasized that selective oversight of such issuers creates additional threats. She noted that the participation of counterparties from outside Europe in issuance schemes could lead to excessive strain on the reserves of European issuers and requires additional financial backing. Lagarde highlighted the effectiveness of the MiCAR regulation, which helps reduce liquidity risks by allowing stablecoins to be redeemed in fiat at par, as well as the requirement to hold a significant portion of reserves in European banks.
“But gaps remain. One example is the so-called multi-issuer schemes, where an EU entity and a non-EU entity jointly issue interchangeable stablecoins,” she stated.
The Need for International Cooperation and Regulatory Adaptation
According to Lagarde, in multi-issuer schemes, the greatest risks associated with a sudden surge in redemption requests fall on the European issuer, who may lack sufficient reserves to meet all demands. As an example of addressing this issue, she cited the practices of traditional financial institutions, which are required to ensure coverage not only in their own jurisdiction but also in other countries where they operate.
Lagarde called for a ban on such schemes in the EU if they are not based on similar regulatory standards or lack guarantees for asset transfers between European and non-European issuers. She also emphasized the importance of international cooperation, as global risks always find the least controlled path to penetrate the market.
The ECB President noted that the financial sector is rapidly evolving under the influence of innovations; however, the main risks remain relevant—liquidity shortages, leverage, sudden loss of trust, and hidden interconnections among market participants.
“Our task is to break through the noise of innovations while remaining true to the unchanging principles of proper risk management, oversight, and effective policy. I am confident that institutions like the ESRB can adapt to changes while containing crises,” she concluded.
It is worth noting that Lagarde traditionally remains skeptical about cryptocurrency. She previously emphasized that European banks will not invest reserves in Bitcoin.