European Central Bank (ECB) President Christine Lagarde has urged EU policymakers to accelerate legislation addressing risks posed by stablecoins, warning that current regulations leave Europe vulnerable to financial instability. Speaking at the European Systemic Risk Board (ESRB) conference on September 3, 2025, Lagarde emphasized that while stablecoins appear innovative, they reintroduce long-recognized financial vulnerabilities in new forms.
Liquidity remains the most immediate concern, Lagarde stressed, explaining that stablecoin issuers often promise instant redemption at par while investing in assets that may not be liquid enough to support sudden demand. This imbalance, if unchecked, can spark destabilizing runs. She highlighted specific loopholes in the EU's Markets in Crypto-Assets (MiCA) regulation's "multi-issuance schemes," where an EU and non-EU entity could jointly issue fungible stablecoins. However, MiCA requirements do not apply to the non-EU issuer, meaning redemption pressure would fall disproportionately on EU issuer reserves during market stress.
Lagarde noted this scenario mirrors problems seen in cross-border banking groups, where regulators already enforce liquidity standards like the net stable funding ratio to prevent mismatches. Without similar protections for stablecoins, Europe risks becoming the weak link in global redemption flows. She called for concrete legislation to restrict stablecoin schemes that lack equivalent protections in other jurisdictions, stating: "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."
Her remarks emphasized the importance of international coordination, warning that without global standards, risks could shift toward jurisdictions with the weakest rules, undermining Europe's financial safeguards. This comes as major jurisdictions including the U.S. and Hong Kong have introduced their own stablecoin rules following the EU's MiCA framework.