ECB Warns of Stablecoin Liquidity Risks: Don’t ‘Wait For A Crisis’

European Central Bank president Christine Lagarde has sounded the alarm about stablecoins, highlighting the risk of significant liquidity issues if policymakers don’t address loopholes allowing foreign issuers to avoid EU regulations. Lagarde emphasized concerns around multi-issuance schemes where stablecoins are jointly issued by entities both within and outside the EU. These schemes could leave European investors exposed during market downturns because non-EU issuers aren’t subject to the bloc’s Markets in Crypto Assets (MiCA) framework, which mandates safeguards like prohibiting redemption fees.