ECB Chief Says Foreign Stablecoin Issuers Must Face EU Standards

European Central Bank President Christine Lagarde warned that the EU must close gaps in stablecoin regulation to avoid destabilizing runs on reserves, Reuters reported. She told lawmakers that both EU and foreign issuers should face equal requirements.

Stablecoin Risks Under EU Rules

The EU’s Markets in Crypto-Assets Regulation (MiCAR) requires stablecoins to be fully backed. Lagarde said the framework leaves room for risk if non-EU firms operate under looser rules. She urged lawmakers to demand equivalence regimes from foreign jurisdictions.

“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 said.

Lagarde warned that holders may choose to redeem in the EU, where MiCAR bans fees and imposes stricter safeguards. That could concentrate pressure on reserves based in the bloc.

“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,” she said. “But the reserves held in the EU may not be sufficient to meet such concentrated demand.”

International Cooperation Needed

Lagarde added that without global standards, risks will shift to weakly regulated markets. “Without a level global playing field, risks will always seek the path of least resistance,” she said.

Federico Cornelli, a commissioner at Italy’s market watchdog CONSOB, said EU rules must also reinforce that cryptocurrencies are not legal tender. “Only the euro issued by our ECB is legal tender, and this must be made very clear to all citizens,” he said.

Related: ECB President Dismisses Bitcoin as EU Reserve amid CNB's $7B Proposal

The ECB, as chief banking supervisor and lender of last resort in the eurozone, has placed stablecoin oversight at the center of its stability mandate.

Early this year, Lagarde said Bitcoin (BTC) is unlikely to be adopted as a reserve asset by EU banks. Her remarks came after the Czech National Bank (CNB) put forward a proposal to allocate 5% of public funds to Bitcoin as part of a diversification plan.

The CNB was scheduled to review the proposal on January 30, with the potential allocation amounting to more than $7.3 billion, based on its $146 billion in total reserves.

At the January 30 conference, Lagarde reiterated that Bitcoin does not meet the ECB’s criteria for reserve assets, which emphasize liquidity, security, and stability.