European Central Bank (ECB) president Christine Lagarde has called on EU lawmakers to enforce strong protections and equal regulatory standards for foreign stablecoin issuers, warning that without such measures, Europe could face sudden withdrawals that would strain its financial reserves.
Speaking at a regulatory conference on Wednesday, Lagarde highlighted that the EU’s crypto regulatory framework, particularly the Markets in Crypto-assets Regulation (MiCAR), is among the world’s most rigorous and sets a global benchmark, according to Reuters.
MiCAR requires every stablecoin to be fully backed by assets such as cash or government securities, with no fractional reserves permitted. Under these rules, holders must be able to redeem stablecoins at face value—typically without fees—and issuers must secure authorisation from EU regulators, meeting strict governance and risk management criteria.
Lagarde emphasised that both domestic and foreign stablecoin issuers should be held to the same high standards. She stated: “European legislation should ensure that such schemes cannot operate in the EU unless supported by robust equivalence regimes in other jurisdictions and safeguards relating to the transfer of assets between the EU and non-EU entities.” She further stressed the importance of international cooperation, warning: “Without a level global playing field, risks will always seek the path of least resistance.”
The ECB, as the lender of last resort and primary regulator for eurozone banks, plays a vital role in maintaining financial stability and providing emergency liquidity during crises. Lagarde noted that, under MiCAR, stablecoin holders can redeem tokens issued within or outside the EU wherever they choose.
This could encourage investors to seek redemption in the EU during a bank run, given the bloc’s stricter reserve requirements and prohibition on redemption fees.
However, Lagarde cautioned that reserves held in the EU might not be sufficient to meet concentrated demand in an emergency. She warned: “In the event of a run, investors would naturally prefer to redeem in the jurisdiction with the strongest safeguards, which is likely to be the EU, where MiCAR also prohibits redemption fees. But the reserves held in the EU may not be sufficient to meet such concentrated demand.”
Lagarde’s remarks come as regulators worldwide debate how to address the risks posed by stablecoins and ensure consistent standards for digital assets, especially as adoption by global consumers and institutions continues to accelerate.
