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ECB's Lagarde says EU should close loopholes in stablecoin regulation
Published by Global Banking & Finance Review®
Posted on September 3, 2025
2 min readLast updated: January 22, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on September 3, 2025
2 min readLast updated: January 22, 2026
Lagarde calls for tighter EU stablecoin regulations to prevent reserve runs. MiCAR ensures stablecoin backing, but international cooperation is key.
FRANKFURT (Reuters) -European Union legislators should demand safeguards and robust equivalence regimes from foreign issuers of stablecoins to prevent the risk of runs on reserves held in the EU, European Central Bank President Christine Lagarde said on Wednesday.
The EU has put in place one of the world's strictest regimes on crypto assets, requiring that stablecoins, which are pegged to an official currency, be fully backed by reserves.
But Lagarde said legislators should hold companies that issue stablecoins both in the EU and abroad to the same, high standards.
"European legislation should ensure that such schemes cannot operate in the EU unless supported by robust equivalence regimes in other jurisdictions and safeguards relating to the transfer of assets between the EU and non-EU entities," she told a regulatory conference.
"This also highlights why international cooperation is indispensable. Without a level global playing field, risks will always seek the path of least resistance," Lagarde said.
Speaking later at the same event, Italian market regulator Federico Cornelli said EU rules had to make clear that cryptocurrencies, including stablecoins, could not be considered legal tender in any financial transaction.
"Only the euro issued by our ECB is legal tender and this must be made very clear to all citizens," said Cornelli, a commissioner at Italy's market watchdog CONSOB.
The ECB is the lender of last resort for euro zone banks and their chief regulator. It is also responsible for financial stability in the EU, along with national authority.
Lagarde noted that the EU's Markets in Crypto-Assets Regulation (MiCAR) allowed holders of a stablecoin issued both in the bloc and abroad to liquidate it wherever they saw fit.
This means they would likely choose the EU in the event of a run, in light of its stricter requirements on reserves. But reserves held in the EU may prove too low during such a fire sale.
"In the event of a run, investors would naturally prefer to redeem in the jurisdiction with the strongest safeguards, which is likely to be the EU, where MiCAR also prohibits redemption fees," Lagarde said. "But the reserves held in the EU may not be sufficient to meet such concentrated demand."
(Reporting by Francesco Canepa; editing by Balazs Koranyi, William Maclean and Timothy Heritage)
Lagarde suggests that EU legislators should demand robust equivalence regimes and safeguards from foreign issuers of stablecoins to mitigate risks.
The EU has made it clear that only the euro issued by the ECB is considered legal tender, as stated by Italian market regulator Federico Cornelli.
The EU's Markets in Crypto-Assets Regulation (MiCAR) allows stablecoin holders to liquidate their assets wherever they choose, which could lead them to prefer the EU during a financial crisis.
Lagarde highlighted that without robust regulations, the risk of runs on reserves held in the EU could increase, especially during financial instability.
Lagarde emphasized that international cooperation is essential to create a level global playing field, as risks will always seek the path of least resistance without it.
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