Lagarde: European Union legislation should ensure that stablecoins cannot operate in the European Union

ECB President Christine Lagarde: European Union legislation should ensure that stablecoins cannot operate in the European Union unless backed by strong equivalence regimes in other jurisdictions, as well as safeguards related to the transfer of assets between the European Union and non-European Union. In the case of stablecoins, the European Union's Crypto Asset Markets Regulation (MiCAR) attempts to address this risk in two ways. First, stablecoin issuers must allow European Union investors to always redeem their holdings at face value. Second, stablecoin issuers must hold a significant percentage of reserves in bank deposits. As the crypto-asset industry has shown, the shadow of risk remains: tight liquidity, leverage, sudden loss of confidence, and hidden interconnections.