- Lagarde has called for global cooperation on crypto-related regulations
- She has raised flags against potential liquidity shortcomings of stablecoins issued by foreign firms
- The global stablecoin market cap stands at over 273 billion
The European Central Bank (ECB) is now assessing the loopholes around stablecoins in the EU region. This week, the president of the European Central Bank, Christine Lagarde, expressed her concerns on stablecoins issued by foreign entities — given that crypto rules are still under development in several parts of the world keeping windows for errors open for the time being.
Lagarde spoke on her concerns during the ninth annual conference of the European Systemic Risk Board on September 4. Essentially, she said that clearer rules must be brought in to oversee stablecoin issuance collectively by two entities — where one is MiCA-compliant and the other is foreign-based.
“In such cases, MiCA requirements do not extend to the non-EU issuer. 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 MiCA also prohibits redemption fees. But the reserves held in the EU may not be sufficient to meet such concentrated demand,” Lagarde said.
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Unless supported by robust equivalence regimes, Lagarde said, non-MiCA registered firms should not be allowed to conduct stablecoin-related operations in the EU.
With this, she reiterated India’s call for a global cooperation in creating a uniform playing field for the crypto industry.
“International cooperation is indispensable. Without a level global playing field, risks will always seek the path of least resistance,” she said.
Lagarde’s statements come at a time when Ripple has expressed a keen interest in exploring the European market. Based in the U.S., Ripple is touted among the largest stablecoin firms in the world that issues the USDC token. In July, the company has applied for a MiCA registration in Luxembourg.
Stablecoins are digital tokens that are pegged against reserved assets like fiat currencies. This keeps them stable against fluctuations in the crypto market. The U.S. has recently given a formal recognition to stablecoins as part of the GENIUS Act — making them part of the economic ecosystem.
As of September 4, the global stablecoin market cap stands at over 273 billion, data by The Block shows.
