Europe may struggle to contain a financial shock tied to crypto firms and banks because its crisis tools are more limited than those used in the U.S. during the 2023 banking turmoil, a senior official with European bank UniCredit warned Thursday.
Elena Carletti, UniCredit’s deputy vice chair and head of the board’s risk committee, said European authorities may not be able to guarantee crypto-linked deposits in the same way U.S. regulators did after the collapses of Silicon Valley Bank and Signature Bank. Speaking at a banking conference hosted by Madrid’s IESE Business School, Carletti noted that the U.S. decision to protect all deposits, including funds held by stablecoin issuers, helped stabilize crypto markets during the crisis. “The same decision cannot be easily taken in Europe,” she said.
The comments come as the European Union’s Markets in Crypto-Assets regulation (MiCA) pushes stablecoin issuers closer to traditional banks by requiring certain reserves to be held in liquid assets such as bank deposits and government securities. This linkage could become problematic, as illustrated during the Silicon Valley Bank collapse in March 2023. Circle, issuer of the USDC stablecoin, revealed that $3.3 billion of its reserves were held at SVB, causing USDC to briefly lose its dollar peg. U.S. regulators subsequently guaranteed all deposits at SVB and Signature Bank, restoring confidence.
Carletti warned that Europe’s deposit guarantee system, which generally protects up to €100,000 ($116,500) per depositor per bank, may not absorb similar stress if large stablecoin reserve accounts come under pressure. “That means that we are forcing a certain alliance of stablecoin and crypto providers with the banking sector without the possibility of extending insurance in the same way, and that to me is a double form of weakness,” she added.
