EU Stablecoin Regulation Faces New Scrutiny

European Central Bank (ECB) President Christine Lagarde has urged the European Union to close loopholes in stablecoin regulation by imposing stricter safeguards on both EU-based and foreign issuers.

Speaking at a regulatory conference on Wednesday, Lagarde warned that without tougher rules, the EU could face financial instability risks, particularly during runs on stablecoin reserves.

Lagarde: Foreign Stablecoin Issuers Must Meet EU Standards

Stablecoins, which are pegged to traditional currencies like the euro or dollar, are already regulated under the EU’s Markets in Crypto-Assets Regulation (MiCAR), one of the world’s strictest crypto frameworks.

Lagarde emphasized that foreign stablecoin issuers should not be allowed to bypass these rules.

“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,” Lagarde said.

She added that international cooperation is crucial, warning that without a global level playing field, risks would “always seek the path of least resistance.”

Risks of Stablecoin Runs in the EU

Lagarde noted that MiCAR allows stablecoin holders, whether the token is issued inside or outside the EU, to redeem their assets in the bloc.

This could lead to concentrated redemption pressure in the EU during a financial crisis, since investors would prefer to cash out in the region with the strictest safeguards and no redemption fees.

However, she cautioned that reserves held in the EU may not be sufficient to cover such a surge in demand.

EU Regulators Reaffirm the Euro as Legal Tender

At the same event, Federico Cornelli, commissioner at Italy’s market regulator CONSOB, stressed that cryptocurrencies, including stablecoins, must not be considered legal tender within the EU.

“Only the euro issued by our ECB is legal tender and this must be made very clear to all citizens,” Cornelli said.

This underscores the ECB’s dual role as the lender of last resort for eurozone banks and as a key guardian of financial stability.

Why Stablecoin Regulation Matters for the EU

• Financial Stability: Prevents liquidity runs on reserves.
• Investor Protection: Ensures redemption guarantees and transparency.
• Global Consistency: Pushes foreign issuers to meet EU standards.
• Legal Clarity: Reinforces that only the euro is legal tender.

Conclusion: EU Pushes for Stronger Global Crypto Rules

Christine Lagarde’s warning highlights the urgent need for tighter oversight of stablecoins to safeguard Europe’s financial system. By pushing for equivalence regimes and cross-border cooperation, the ECB aims to ensure that both EU and non-EU issuers play by the same rules.

As stablecoins grow in adoption, the EU’s stance signals its determination to maintain financial security, investor trust, and the primacy of the euro in the digital economy.