Lagarde opened the conference by noting that while the architecture of the financial system is changing, the underlying risks remain the same. She placed particular emphasis on cryptocurrencies and especially stablecoins, which, despite their apparent novelty, actually bring well-known threats into the system – notably liquidity risks and insufficient regulation.
According to the ECB President, the current MiCAR (Markets in Crypto-Assets Regulation) framework requires stablecoin issuers in the EU to guarantee redemption at par value and hold a significant portion of reserves in bank deposits. However, such requirements do not apply to projects using a so-called dual issuance model, where a stablecoin is simultaneously issued by an EU resident and by a jurisdiction outside the bloc.
Regulators’ Concerns
In such models, investors in times of crisis would prefer to redeem assets within the EU, where protections exist and no withdrawal fees are charged. This could lead to a concentration of claims in a single jurisdiction without adequate reserves. Lagarde stressed that the risks created by these schemes are similar to those already experienced in the banking sector.
She stated that such stablecoins should not operate in the European Union without reliable equivalent regimes in third countries and additional safeguards to ensure the movement of assets across jurisdictions. Without this, systemic disruptions are possible.
Lagarde also reminded the audience of the need for global regulation to prevent risk leakage into the least protected regions.
Her remarks come against the backdrop of the recent passage of the GENIUS Act in the United States, which regulates the $288 bln stablecoin market. As previously reported by the Financial Times, this step accelerated discussions on the digital euro among European officials. EU regulators fear losing competitiveness in light of U.S. legislative initiatives.
According to Lagarde, the task of regulators today is to filter out the noise, remain committed to the fundamental principles of oversight, and apply proven risk management tools to new financial models.
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