TLDR
- Lagarde urges urgent global rules on stablecoins to prevent liquidity risks.
- ECB warns: cross-border stablecoins threaten stability without strict rules.
- Stablecoins mirror old risks; Lagarde calls for proactive global oversight.
- EU must tighten stablecoin laws as US sets federal standards, warns Lagarde.
- Cross-border stablecoin gaps push ECB to demand tougher regulation fast.
Christine Lagarde, President of the European Central Bank (ECB), has urged global policymakers to act on stablecoin regulation. She raised concerns about regulatory gaps and liquidity risks linked to multi-jurisdictional stablecoin issuance. Her call came during the ninth annual European Systemic Risk Board (ESRB) conference held in Frankfurt on September 3, 2025.
Lagarde highlighted how stablecoins present familiar risks under new appearances, especially liquidity risk during sudden redemption demands. She warned that existing stablecoin regulation under the EU’s Markets in Crypto-Assets Regulation (MiCAR) framework does not cover all scenarios. Therefore, she insisted that stronger cross-border safeguards are needed to prevent systemic shocks.
She pushed for swift regulatory coordination, urging the EU to restrict stablecoins issued jointly with non-EU entities unless strict conditions are met. The ECB president emphasized that stablecoin regulation must remain proactive, consistent, and future-proof. Otherwise, the financial system could face disruptions from unregulated or lightly regulated crypto-assets.
MiCAR Faces Limitations in Managing Cross-Border Stablecoins
Lagarde addressed specific gaps within the MiCAR framework during her remarks at the ESRB event. She explained that stablecoin regulation under MiCAR requires EU-based issuers to allow redemption at par value and hold strong reserves. However, those requirements do not extend to issuers outside the EU that jointly issue the same tokens.
She emphasized that, in the event of a mass redemption, users would naturally prefer the safer, EU-regulated redemption route. Yet, reserves held inside the EU may fall short if external issuers don’t follow the same rules. This uneven setup creates potential stress points, undermining the resilience of stablecoin regulation across jurisdictions.
Lagarde demanded firm legislative action from the EU to close these structural loopholes. She called for bans on such multi-issuance schemes unless backed by equivalent safeguards abroad. She said stablecoin regulation must become globally consistent to stop risky financial arbitrage.
Stablecoins Pose Known Financial Risks in New Forms
Lagarde made clear that stablecoins replicate known financial threats in digital form, particularly liquidity mismatches and operational vulnerabilities. She noted that these risks mirror those previously seen in money market funds and traditional banking setups. As a result, regulators already have the tools to address them if deployed wisely under firm stablecoin regulation.
She emphasized that digital assets should not bypass rules by appearing technologically novel. Risks around redemption pressure, asset backing, and interlinked entities are long-standing issues in finance. Stablecoin regulation must treat function over form and maintain strong oversight regardless of packaging.
The ECB has been studying digital euro development, but global trends in stablecoin regulation are now influencing the timeline. Lagarde made clear that Europe must not lag behind in securing its financial system. International cooperation is the key to effective stablecoin regulation, she concluded.
