ECB Chief Warns of Stablecoin Risks, Calls for Global Regulatory Alignment

European Central Bank President Christine Lagarde has issued a stark warning about the risks posed by unregulated stablecoin issuers operating in the EU. Speaking to lawmakers, she emphasized the need for foreign stablecoin providers to meet the same stringent standards as EU-based entities under the Markets in Crypto-Assets Regulation (MiCAR).

Lagarde highlighted a critical gap in the current framework: non-EU firms operating under looser rules could destabilize the market if redemption pressures concentrate in jurisdictions with stronger safeguards. "Investors WOULD naturally prefer to redeem in the EU, where MiCAR bans fees and imposes stricter protections," she noted, pointing to the potential for reserve shortfalls during market stress.

The ECB chief called for robust equivalence regimes with foreign jurisdictions and safeguards on cross-border asset transfers. Without global coordination, she warned, risks will simply migrate to weakly regulated markets—a regulatory arbitrage that could undermine financial stability.