Christine Lagarde, the president of the European Central Bank (ECB), demands stricter conditions for non-EU stablecoin issuers. She warns that these entities might avoid the EU’s Markets in Crypto-Assets (MiCA) regulation. “They are risks long familiar to supervisors and regulators. The most evident is liquidity risk,” Lagarde pointed out in her speech at the conference of the European Systemic Risk Board. [1]

Liquidity risks in multi-issuance stablecoin schemes

Lagarde warned that multi-issuance schemes allow EU and non-EU entities to jointly issue fungible stablecoins, while only EU operations face regulatory requirements. “Stablecoin issuers must allow EU investors to always redeem their holdings at par value and must hold a substantial share of reserves in bank deposits. But gaps remain,” she said.

In such schemes, MiCA requirements do not extend to the non-EU issuer, creating a liquidity risk. “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 added.

Call for stronger legislation and international cooperation

The ECB president called for European legislation to ensure multi-issuance schemes cannot operate without robust equivalence regimes in other jurisdictions and safeguards for asset transfers between EU and non-EU entities. “This also highlights why international cooperation is indispensable. Without a level global playing field, risks will always seek the path of least resistance,” Lagarde concluded.

The legislation could be inspired by requirements already applied in the EU banking sector. Banking groups face consolidated liquidity requirements that ensure reserve availability across all operational levels through net stable funding ratios and liquidity coverage standards. Today, stablecoin multi-issuance schemes could replicate the same risks faced by the banking sector, but without equivalent regulatory oversight.

ECB repeats warnings as US acts swiftly

This is not the first time the ECB has raised such concerns. Advisor Jürgen Schaaf previously cautioned that widespread adoption of dollar stablecoins could weaken European monetary control and financial sovereignty. “Stablecoins are reshaping global finance – with the US dollar at the helm. Without a strategic response, European monetary sovereignty and financial stability could erode,” he wrote in the ECB blog in late July. [2]

The warning comes as euro-backed stablecoins represent only 0.15% of the $230 billion global market, while USD-pegged tokens account for 99% of stablecoin capitalization. [3]

European officials have since accelerated planning for the digital euro after US president Donald Trump signed the GENIUS Act, establishing comprehensive dollar stablecoin regulations. The swift US action unsettled EU policymakers, who had previously pursued more cautious development of their central bank digital currency.

Sources:

[1] https://www.ecb.europa.eu/press/key/date/2025/html/ecb.sp250903~10647505c7.en.html

[2] https://www.ecb.europa.eu/press/blog/date/2025/html/ecb.blog20250728~e6cb3cf8b5.en.html?s=09

[3] https://finance.yahoo.com/news/ecb-chief-lagarde-calls-stricter-115601917.html