ECB raises concerns over Trump's crypto stance, urging stronger EU regulations on stablecoins to safeguard financial stability - IcoHolder.

The European Central Bank (ECB) has raised alarms about the potential risks of U.S. President Donald Trump's pro-crypto stance, suggesting that it could destabilize the financial landscape without stronger safeguards from European regulators. In a policy paper seen by POLITICO, the ECB warned that Trump’s support for the U.S. crypto industry could trigger “financial contagion,” urging urgent changes to the European Union’s (EU) Markets in Crypto Assets (MiCA) regulation.

ECB President Christine Lagarde highlighted that the current MiCA framework is insufficient, particularly regarding the “multi-issuance” model, where both European and non-European stablecoin issuers operate in tandem. Lagarde stressed the need for regulatory reforms to address the unique threat posed by stablecoins, which she argued is not adequately addressed under the existing rules.

However, the European Commission has strongly disagreed with the ECB’s concerns. In its own paper, the Commission argued that the risks associated with global stablecoins, such as those backed by the dollar, are manageable under the current legal framework. Some EU officials criticized the ECB’s position, claiming that the central bank misunderstood MiCA’s provisions and overemphasized the dangers posed by stablecoins in an effort to gain support for its upcoming digital euro project, which is slated for release by October.

The ECB’s concerns center on the growing dominance of dollar-backed stablecoins, which it fears could drain European capital into U.S. debt markets and undermine the EU’s financial autonomy. Furthermore, the central bank warned that European issuers might face the risk of having to redeem both local and foreign tokens, potentially triggering a “run” on reserves.

This ongoing dispute underscores the tension within the EU over how to regulate the rapidly growing crypto industry and protect financial stability in the face of evolving global market dynamics.