Christine Lagarde, president of the European Central Bank (ECB), is calling for policymakers to address gaps in stablecoin regulation, particularly for those issued beyond the “robust” Markets in Crypto-Assets (MiCA) framework in the European Union.

In prepared remarks for the ninth annual conference of the European Systemic Risk Board on Wednesday, Lagarde ​​said EU lawmakers should take steps in situations where an entity covered under MiCA and a non-EU entity jointly issue stablecoins.

She added that such stablecoin issuers should not be allowed to operate in the EU unless there were “robust equivalence regimes” at the source, which included allowing EU investors “to always redeem their holdings at par value” and requiring issuers to fully back their coins.

“In the event of a run, investors would naturally prefer to redeem in the jurisdiction with the strongest safeguards, which is likely to be the EU, where MiCAR also prohibits redemption fees,” said Lagarde. “But the reserves held in the EU may not be sufficient to meet such concentrated demand.”

A stablecoin is a cryptocurrency designed to maintain a stable value by pegging it to an asset like the US dollar or the euro.

ECB policymakers have explored the potential rollout of a digital euro for years, but could be pressured by stablecoin laws and regulations pushed by the Trump administration in the US.

The US Congress passed a law in July establishing a framework for stablecoins, likely benefiting issuers of US-pegged coins.

Related: EU exploring Ethereum, Solana for digital euro launch: FT

“[The US government’s policies] could potentially result not just in further losses of fees and data, but also in euro deposits being moved to the United States and in a further strengthening of the role of the dollar in cross-border payments,” said ECB executive board member Piero Cipollone in April. 

US, EU and China competing for the stablecoin market?

With a US law set for implementation and EU policymakers weighing their approach to stablecoins, China may also be exploring the launch of a yuan-backed coin.

Reports from August suggested that the Chinese government was considering a stablecoin pegged to its renminbi currency following the slow rollout of a digital yuan. As of Monday, officials had not confirmed whether the country would push for a state-issued stablecoin in response to efforts by the US to strengthen the dollar’s role.

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