European Central Bank President Christine Lagarde said that the European Union should hold non-EU stablecoin issuers to the same stringent reserve requirements as their EU counterparts to address the risk of runs.
Speaking Wednesday at the annual conference of the European Systemic Risk Board, Lagarde said "gaps remain" in the EU's current Markets in Crypto-Assets (MiCA) regulation regarding requirements for stablecoin issuers.
Lagarde noted that MiCA requires stablecoin issuers to hold substantial reserves in bank deposits and to allow EU investors to always redeem their holdings at par value.
However, Lagarde warned that vulnerabilities persist, particularly in multi-issuance schemes where EU and non-EU entities jointly issue fungible stablecoins. In these arrangements, MiCAR's stringent requirements apply only to the EU component, creating potential regulatory arbitrage opportunities, according to Lagarde.
"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 MiCAR also prohibits redemption fees," said Lagarde. "But the reserves held in the EU may not be sufficient to meet such concentrated demand."
Lagarde called for European legislation to prevent such schemes from operating in the EU unless supported by robust equivalence regimes in other jurisdictions and proper safeguards governing asset transfers between EU and non-EU entities.
"This also highlights why international cooperation is indispensable," Lagarde added. "Without a level global playing field, risks will always seek the path of least resistance."
MiCA, which came into full effect at the end of last year, establishes comprehensive guidelines and regulations for crypto assets across the European Union trading bloc. MiCA primarily regulates crypto asset issuers and service providers.
Stablecoins have gained traction as the U.S. shifts to a more crypto-friendly stance under President Donald Trump's administration. In April, the Federal Reserve reinforced that shift by withdrawing earlier guidance that had discouraged banks from engaging in crypto and stablecoin activities.
As of Sept. 3, the total supply of U.S. dollar-pegged stablecoins has risen to $271.3 billion, up from $256.3 billion at the start of August, according to The Block's data dashboard.
