09-08-2025 
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European Central Bank (ECB) President Christine Lagarde gave a speech on the risks associated with stablecoins, in which she argued that the European Union should impose the same stringent reserve requirements on non-EU stablecoin issuers as those required of EU issuers.
- Risks associated with stablecoins
- EU stablecoin issuers’ requirements
- Multi-issuance schemes
- U.S.-based stablecoin issuers
In remarks before the European Systemic Risk Board on Wednesday, Lagarde urged policymakers to address gaps in stablecoin regulation, particularly for issuers outside the Markets in Crypto-Assets Regulation (MiCAR) scope.
Based on recent estimates, the global stablecoin market cap sits at around $289 billion.
Regarding this booming asset class, Lagarde said that “at first sight, these entities and activities may seem novel. But we do not need to wait for them to mature to realise that they are reintroducing old risks through the back door.”
According to the ECB president, the most evident risk is liquidity: “We know the challenges posed by institutions that invest in risky assets while promising investors redemption at short notice and at par. Such entities must mitigate the risk of a run by ensuring that they have sufficient liquidity to meet redemptions swiftly.”
For EU issuers, these risks are largely accounted for under MiCAR.
Requirements of EU issuers
The stablecoin provisions of MiCAR came into force on June 30 last year and included a host of new standards for issuers of asset-referenced tokens (ARTs) and e-money tokens (EMTs); the former being stablecoins that purport to maintain a stable value by referencing another value or right, the latter stablecoins pegged to a fiat currency.
Amongst the new requirements, issuers have to be authorized by the Central Bank and to publish a white paper containing information on the relevant token for investors; there are conduct and governance requirements around marketing, disclosure of information, and dealing with conflicts of interest; prudential requirements to ensure sufficient liquidity and the ability to meet redemption requests; and no stablecoins can be offered to the public or admitted to trading on a trading platform for digital assets unless the issuer is authorized in the EU and publishes a ‘white paper’ approved by the national competent authority (NCA).
In addition, as Lagarde noted in her speech, EU issuers must “allow EU investors to always redeem their holdings at par value” and “hold a substantial share of reserves in bank deposits.” Regarding these reserves, fiat-backed stablecoins (EMTs) must be backed by a liquid reserve with a one-to-one ratio.
The various requirements address many of the associated risks of stablecoins; however, they do not extend to non-EU issuers, wherein lies the EU president’s concerns.Multi-issuance schemes
Lagarde’s main concern was so-called “multi-issuance schemes,” whereby an EU entity and a non-EU entity jointly issue fungible stablecoins. In such cases, MiCAR requirements do not extend to the non-EU issuer.
Therefore, in the event of a run, Lagarde suggested that it would only be natural for investors to prefer to redeem in the jurisdiction with the strongest safeguards, which—thanks to MiCAR—would likely be the EU. MiCAR also prohibits redemption fees, making it an even more appealing jurisdiction in this scenario.
However, the ECB president warned that if a large-scale run were to happen, the reserves held in the EU may not be sufficient to meet such concentrated demand.
“We know the dangers. And we do not need to wait for a crisis to prevent them,” said Lagarde. “That is why we must take concrete steps now. European legislation should ensure that such schemes cannot operate in the EU unless supported by robust equivalence regimes in other jurisdictions and safeguards relating to the transfer of assets between the EU and non-EU entities.”
In other words, the ECB president was pitching an effective EU ban on stablecoins jointly issued from jurisdictions with MiCAR-equivalent protections and requirements.
Fortunately for United States-based issuers, which includes Circle (NASDAQ: CRCL)— issuer of USDC, the second largest stablecoin by market cap, $72.5 billion, accounting for over a third of the overall global stablecoin market—the GENIUS Act was signed into law by President Trump in July.
The legislation requires U.S. stablecoin issuers to maintain reserves backing outstanding stablecoins on at least a one-to-one basis, and reserves must only consist of certain specified assets, including U.S. dollars, federal reserve notes, funds held at certain insured or regulated depository institutions, certain short-term Treasuries, Treasury-backed reverse repurchase agreements, and money market funds.
The GENIUS Act will come into force on either January 18, 2027, or 120 days after final implementing regulations are issued, whichever comes first. When it does, its provisions should be enough to appease Lagarde that—should a run occur—enough investors and holders of the multi-issuance stablecoin scheme would be able to redeem in the U.S. as well as the EU.
The ECB president concluded by emphasizing that “this also highlights why international cooperation is indispensable. Without a level global playing field, risks will always seek the path of least resistance.”
Watch | MiCA and the future of stablecoins: What comes next for Tether?
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