European Central Bank President Christine Lagarde told EU policymakers that foreign stablecoins should comply with the bloc’s rules before being allowed to operate on EU soil, pressing for stronger cross‑border safeguards to protect investors and local liquidity pools.
Speaking at a European Systemic Risk Board conference in Frankfurt on Sept. 3, 2025, Lagarde warned that in a stress event investors will prefer jurisdictions with clearer protections — such as the EU’s Markets in Crypto‑Assets (MiCA) framework, which already prohibits redemption fees — potentially prompting mass redemptions that could drain reserves elsewhere.
“The risk of liquidity mismanagement across jurisdictions is one we have seen before,” Lagarde said, drawing a parallel with banking rules that require reserves to be available where and when they are needed. She pointed to prudential tools like the net stable funding ratio and liquidity coverage ratio as examples of rules that apply across consolidation levels and said similar discipline is needed for multi‑issuance stablecoin arrangements.
Her comments highlight regulators’ growing focus on stablecoins in 2025. Major jurisdictions including the U.S. and Hong Kong have introduced their own issuance and oversight rules, while the EU enforces MiCA. The debate now centers on how to prevent regulatory arbitrage and ensure that issuers maintain accessible reserves and clear redemption terms across borders.
Why this matters: If the EU requires non‑EU issuers to meet local rules before operating, stablecoin providers may need to establish EU‑based entities, hold dedicated reserves in the bloc, or limit services — moves that affect liquidity, cross‑border flows and product availability for European users.
Risk note: These regulatory shifts raise compliance and fragmentation risks for issuers and could change how quickly users can redeem tokens during stress events. Market participants should factor legal and liquidity constraints into product design and treasury planning.
Source: European Central Bank. Read the original coverage for full details.