ECB Warns of Weak EU Stablecoin Regulation: Liquidity Risks Threaten Stability

The European Central Bank (ECB) has sounded the alarm about inadequate regulatory frameworks for stablecoins within the EU, highlighting potential risks to financial stability and prompting urgent action from policymakers. ECB President Christine Lagarde stressed the urgency of addressing these gaps, emphasizing that current regulations fail to mitigate liquidity concerns and create a fertile ground for exploitation through ‘regulatory arbitrage’. She emphasized the risk of liquidity crises arising from regulatory discrepancies across regions.