European Central Bank (ECB) President Christine Lagarde urged European Union (EU) lawmakers to impose stringent requirements and safeguards on foreign stablecoins.
Lagarde argued they should comply with the bloc’s regulatory standards before operating on EU soil, she said in a speech at a European Systemic Risk Board (ESRB) conference in Frankfurt on Wednesday.
The ECB president cautioned that during a stablecoin run, investors would be more likely redeem in jurisdictions with stronger protections, such as the EU, where Markets in Crypto-Assets (MiCA) regulation prohibits redemption fees, potentially depleting local reserves.
“The risk of liquidity mismanagement across jurisdictions is one we have seen before. Banking groups, for example, are already required to ensure that reserves are available in the part of the group where and when they are needed,” Lagarde said.
“This is why requirements such as the net stable funding ratio and liquidity coverage ratio apply at every level of consolidation. Multi-issuance schemes replicate these very same risks within a single entity.”
She emphasized the need for robust regulation to prevent arbitrage and to ensure financial stability across borders.
Stablecoins – token pegged to the value of a traditional financial asset such as a fiat currency – have been front and center of developments in the approach to digital assets by governments and regulators in 2025.
Major jurisdictions such as the U.S. and Hong Kong have introduced rules for the issuance and treatment of stablecoins, following on from the EU, which handles them through MiCA.