ECB’s Lagarde Warns Of Stablecoin Liquidity Risks: Don’t `Wait For A Crisis’
European Central Bank president Christine Lagarde is warning that stablecoins pose serious liquidity risks unless policymakers close loopholes that let foreign issuers skirt EU rules. “We know the dangers,” she said i n prepared remarks for the European Systemic Risk Board conference. “And we do not need to wait for a crisis to prevent them.” Lagarde highlighted concerns over “multi-issuance schemes,” where stablecoins are jointly issued by entities inside and outside the EU. She said such schemes could leave European investors exposed in a run, since non-EU issuers aren’t bound by the bloc’s Markets in Crypto Assets (MiCA) framework, which mandates safeguards like prohibiting redemption fees. “In a crisis, investors would naturally prefer to redeem in the jurisdiction with the strongest safeguards,” she said. “But the reserves held in the EU may not be sufficient to meet such concentrated demand.” She compare...