Christine Lagarde Urges Closing Regulatory Gaps
Christine Lagarde, President of the European Central Bank (ECB), is calling for prompt action to close regulatory loopholes in the stablecoin market for coins issued by groups active in both EU and non-EU jurisdictions.
Speaking at the ninth annual European Systemic Risk Board (ESRB) conference in Frankfurt, Lagarde emphasized the importance of shielding European investors, especially as cryptocurrencies are spreading rapidly.
EU Standards for Stablecoin Issuers
Lagarde stated that any stablecoin issuer operating in the EU must meet strong equivalence-at-source standards. Key requirements include:
- Investors must be able to redeem holdings at par value
- Coins must be fully backed by reserves
Globally, more people are relying on stablecoins—cryptos designed to maintain a constant value relative to a fiat currency. Lagarde warned that, in a market run, EU investors could seek safe havens in jurisdictions with stronger safeguards, potentially overwhelming ECB reserves.
Also Read : CFTC Allows Foreign Crypto Exchanges to Legally Offer Services to US Traders
Europe vs U.S. and China in the Digital Currency Race
The ECB issued this call after the United States passed a federal law establishing a framework for stablecoins, benefiting issuers of U.S.-pegged coins.
Piero Cipollone, ECB Executive Board member, warned that U.S. policies might divert euro deposits abroad and reinforce the U.S. dollar in cross-border payments.
Meanwhile, China is exploring a renminbi-backed stablecoin following its digital currency rollout. Analysts suggest Beijing could push a state-issued digital currency or “stablecoin” to compete with the U.S. and EU.
Protecting Investors and Moving Forward
Lagarde emphasized that stablecoin activity within the EU must ensure:
- Full backing and transparency
- Investor protection under the Markets in Crypto-Assets Regulation (MiCA)
Lawmakers are urged to implement redeemable-at-par-value mechanisms to manage cross-border risks. Without sufficient protections, the EU risks exposure to coins operating in lighter regulatory jurisdictions, potentially jeopardizing investors and the financial system.
Europe’s Path to Tokenized Finance
The ECB’s actions underscore Europe’s determination to innovate while protecting investors in the evolving future of money. Upcoming steps could shape the EU’s response to tokenized finance and boost competitiveness against U.S. and Chinese stablecoins.
