ECB’s Lagarde Urges EU Tight Stablecoin Rules to Prevent Financial Risks

European Central Bank President Christine Lagarde has called on EU lawmakers to impose stringent regulatory requirements and safeguards on foreign-issued stablecoins operating within the bloc to prevent financial instability. She warned that during a stablecoin run, investors would likely redeem tokens in jurisdictions with stronger protections, such as the EU, potentially depleting local reserves and triggering systemic risks. Lagarde emphasized the need for robust equivalence regimes and international cooperation to prevent regulatory arbitrage, where issuers exploit weaker rules in some regions while operating in stricter markets like the EU. The EU's Markets in Crypto-Assets Regulation (MiCA) sets strict standards, including prohibiting redemption fees, but Lagarde stressed the necessity of ensuring that stablecoin issuers abroad meet similar requirements to avoid loopholes. Italian regulator Federico Cornelli reinforced that cryptocurrencies, including stablecoins, should never be considered legal tender, highlighting the primacy of the euro as the only legal tender issued by the ECB. Lagarde's position reflects Europe's cautious approach amid growing global competition in stablecoin regulation, with the U.S. and China advancing their own frameworks.