European Systemic Risk Board chair Lagarde calls for EU legislation to address MiCAR gaps in stablecoin multi-issuance schemes

In a welcome address published by the European Systemic Risk Board (ESRB) for its ninth annual conference, ESRB Chair Christine Lagarde argued that macroprudential oversight should focus on underlying financial activities and system-wide risk transmission as Europe’s financial system becomes more complex. She highlighted the rapid expansion of the non-bank financial sector and the blurring boundary between banks, non-bank financial institutions and fintech platforms, while emphasising that core financial functions and familiar risk types remain largely unchanged. Using stablecoins as an example, Lagarde pointed to liquidity risk as a key enduring vulnerability and described how the EU’s Markets in Crypto-Assets Regulation (MiCAR) seeks to mitigate it by requiring par redemption for EU investors and a substantial share of reserves to be held in bank deposits. She argued that “multi-issuance schemes”, where EU and non-EU entities jointly issue fungible stablecoins, can leave MiCAR requirements inapplicable to the non-EU issuer and could concentrate redemption demand in the EU, potentially overwhelming EU-held reserves. Lagarde called for European legislation to prevent such schemes from operating in the EU unless supported by robust equivalence regimes in other jurisdictions and safeguards governing asset transfers between EU and non-EU entities, and she linked this to the need for international cooperation to limit cross-border regulatory arbitrage.