The post EU stablecoin regulations leave Europe vulnerable, says ECB chief appeared on BitcoinEthereumNews.com. European Central Bank (ECB) President Christine Lagarde has called on policymakers to accelerate legislation targeting the risks posed by stablecoins. Speaking at the European Systemic Risk Board (ESRB) conference on Sept. 3, Lagarde warned that while stablecoins appear innovative, they reintroduce long-recognized financial vulnerabilities in new forms. According to her: “The categories of risk they create are not new. They are risks long familiar to supervisors and regulators.” Stablecoin risks Lagarde stressed that liquidity remains the most immediate concern of the emerging sector. She explained that stablecoin issuers often promise instant redemption at par while investing in assets that may not be liquid enough to support sudden demand. That imbalance, if unchecked, can spark destabilizing runs. [Editor’s Note: It’s worth remembering that a sudden withdrawal demand by customers amounting to 5% of assets under management from Northern Rock bank in the UK led to its collapse, while in 2022, Tether managed redemptions of almost 30% without any issue.] She also highlighted loopholes in the EU’s Markets in Crypto-Assets (MiCA) regulation’s “multi-issuance schemes.” Under this scheme, an EU and non-EU entity could jointly issue fungible stablecoins. However, the ECB President pointed out that MiCA requirements do not apply to the non-EU issuer. The Crypto Investor Blueprint: A 5-Day Course On Bagholding, Insider Front-Runs, and Missing Alpha Nice 😎 Your first lesson is on the way. Please add [email protected] to your email whitelist. So, if investors rush to redeem their holdings, pressure would fall disproportionately on the EU issuer reserves, which may prove insufficient in the market. Lagarde noted that this scenario mirrors problems seen in cross-border banking groups. Regulators already enforce liquidity standards such as the net stable funding ratio to prevent mismatches, but similar protections do not yet exist for stablecoins. She concluded that Europe risks becoming the weak link… The post EU stablecoin regulations leave Europe vulnerable, says ECB chief appeared on BitcoinEthereumNews.com. European Central Bank (ECB) President Christine Lagarde has called on policymakers to accelerate legislation targeting the risks posed by stablecoins. Speaking at the European Systemic Risk Board (ESRB) conference on Sept. 3, Lagarde warned that while stablecoins appear innovative, they reintroduce long-recognized financial vulnerabilities in new forms. According to her: “The categories of risk they create are not new. They are risks long familiar to supervisors and regulators.” Stablecoin risks Lagarde stressed that liquidity remains the most immediate concern of the emerging sector. She explained that stablecoin issuers often promise instant redemption at par while investing in assets that may not be liquid enough to support sudden demand. That imbalance, if unchecked, can spark destabilizing runs. [Editor’s Note: It’s worth remembering that a sudden withdrawal demand by customers amounting to 5% of assets under management from Northern Rock bank in the UK led to its collapse, while in 2022, Tether managed redemptions of almost 30% without any issue.] She also highlighted loopholes in the EU’s Markets in Crypto-Assets (MiCA) regulation’s “multi-issuance schemes.” Under this scheme, an EU and non-EU entity could jointly issue fungible stablecoins. However, the ECB President pointed out that MiCA requirements do not apply to the non-EU issuer. The Crypto Investor Blueprint: A 5-Day Course On Bagholding, Insider Front-Runs, and Missing Alpha Nice 😎 Your first lesson is on the way. Please add [email protected] to your email whitelist. So, if investors rush to redeem their holdings, pressure would fall disproportionately on the EU issuer reserves, which may prove insufficient in the market. Lagarde noted that this scenario mirrors problems seen in cross-border banking groups. Regulators already enforce liquidity standards such as the net stable funding ratio to prevent mismatches, but similar protections do not yet exist for stablecoins. She concluded that Europe risks becoming the weak link…