ECB’s Lagarde Pushes to Make MiCA the Global Standard for Stablecoins

• Christine Lagarde has advocated for stricter rules on non-EU stablecoin issuers.
• Lagarde asked policymakers to compel foreign stablecoin issuers to meet EU standards.
• The ECB president cited vulnerabilities in the current ‘irregular’ system.

European Central Bank (ECB) President Christine Lagarde is making a major push to establish the EU’s MiCA framework as the global standard for stablecoins, calling for stricter oversight of all non-EU issuers. 

Her argument is that without a level playing field, the current system is vulnerable to “regulatory arbitrage” and creates systemic risk for the European financial system.

A “Vulnerable” System and a Major Loophole

Speaking at the annual conference of the European Systemic Risk Board, Lagarde laid out the key vulnerabilities in the current global stablecoin market, suggesting both the EU and non-EU issuers face the same regulatory requirements.

Lagarde’s main concern is “multi-issuance schemes,” where a fungible stablecoin is jointly issued by both an EU entity (which must follow the strict MiCA rules) and a non-EU entity (which may face little to no regulation).

Related: Stablecoin Regulation Heats Up: Lawmakers Push for Guardrails

Why does this create risk for the EU?

Lagarde highlighted the disparity between MiCAR’s stringent requirements, which apply to only She pointed out that in the event of a market panic or a “run” on the stablecoin, investors would naturally rush to redeem their tokens in the jurisdiction with the strongest safeguards; the EU.

This could put disproportionate pressure on the EU-based entity, creating a major financial stability risk. 

The existing protocol needs to be modified

In the meantime, the ECB president proposed a modification to the existing protocol, requesting that lawmakers compel foreign entities to meet the same requirements for EU firms before they can operate such schemes. Lagarde also suggested implementing proper safeguards governing asset transfers between EU and non-EU entities. She emphasized the benefits of international cooperation but noted that without a level global playing field, risks will always seek the path of least resistance.

Stablecoin technology is gaining global traction, with various jurisdictions releasing regulatory frameworks to guide its application. The US Congress released a law in July that guides the use of stablecoins within its region. China is reportedly working on creating a yuan-backed stablecoin following the prolonged rollout of a digital yuan. 

Related: Stablecoin Regulation Draft: House Leaders Chart US Digital Future

Notably, all the recognized global economic giants are showing interest in the stablecoin economy, indirectly lending credence to Lagarde’s latest advocacy, which could protect against risks and irregularities in the future.