Growing US deregulation in crypto assets could potentially lead to financial instability, according to French President Emmanuel Macron.
He says that there is “growing US deregulation in crypto assets and stablecoins.”
If the U.S. lets crypto grow too freely, it could create risks that spill over globally since stablecoins often rely on USD assets.
Stablecoins are tightly tied to fiat reserves, settlement rails, and cross-border flows. If poorly regulated, they can potentially cause contagion across global markets.
Monetary sovereignty
Macron wants Europe to stay protected and “sovereign” in monetary terms, arguing that the EU should not follow the U.S. toward deregulation.
This aligns with the EU’s MiCA regulation, which is much stricter than anything the U.S. has.
The French leader also wants the European Central Bank (ECB) to overhaul its monetary policy to adapt to new financial risks.
It is not common for a eurozone political leader to publicly urge a central bank to change its monetary policy framework, which is why this is rather notable.
The stablecoin risk
The global stablecoin market recently surged by nearly 50% and crossed $300 billion. That rapid growth could make stablecoins “systemically relevant,” senior official of the ECB Olaf Sleijpen. A run on U.S.-dollar–pegged stablecoins could force the ECB to change interest rates.
Most of the global stablecoin supply remains backed by U.S. dollar-denominated reserves, which makes Europe vulnerable.
Europe could end up subordinated to U.S. monetary conditions (even if the ECB wants different policies).