ECB's Lagarde Urges EU Stablecoin Rules Closure, Foreign Safeguards

European Central Bank President Christine Lagarde has repeatedly called for stronger regulations on stablecoins within the European Union, emphasizing the need to close legislative loopholes that could threaten financial stability. She highlighted risks posed by multi-issuance schemes where stablecoins are jointly issued by EU and non-EU entities, which could lead to runs on EU reserves as investors seek redemptions in jurisdictions with the strongest safeguards. Lagarde urged EU legislators to demand robust equivalence regimes and safeguards from foreign stablecoin issuers to prevent regulatory arbitrage and ensure a level global playing field. The EU's Markets in Crypto-Assets Regulation (MiCAR) requires immediate and cost-free redemption of stablecoins within the EU, but this could strain EU reserves if investors redeem en masse. She stressed that international cooperation is indispensable to address these challenges and protect the EU’s monetary policy and financial system. Additionally, the ECB is exploring the development of a digital euro to maintain trust in the financial system as cash usage declines.