A potential shift in U.S. crypto policy under Donald Trump could destabilize the European financial system without stronger EU safeguards, warns the European Central Bank.
The ECB and the European Commission are currently at odds over the resilience of the EU’s landmark Markets in Crypto Assets (MiCA) regulation against financial risks potentially stemming from a Trump presidency supportive of the US crypto sector.
A policy document highlighted the ECB’s concern that MiCA needs prompt revisions, particularly regarding its handling of stablecoins involving both European and non-European issuers (the “multi-issuance” model). The central bank fears Trump’s pro-crypto stance could fuel financial instability across borders.
ECB President Christine Lagarde has indicated that MiCA requires adjustments, suggesting the unique threat posed by stablecoins is recognized within EU institutions. These digital assets, often pegged to fiat currencies like the dollar, are central to the debate.
The European Commission, however, firmly counters these concerns. In its own assessment, the Commission views the risks associated with global stablecoins as “overstated” and believes they can be managed effectively within the current MiCA framework.
An EU official characterized the ECB’s position as stemming from a “basic misunderstanding” of MiCA, dismissing the notion of a traditional bank run on assets fully backed one-to-one as illogical. The official also suggested the ECB might be amplifying stablecoin concerns to bolster support for its own digital euro initiative, slated for potential launch by October.
The ECB’s apprehension centers on a possible surge in dollar-backed stablecoins, which dominate the market. This could divert European capital towards U.S. debt, potentially undermining the EU’s financial autonomy. Furthermore, the ECB warned of scenarios where European issuers might face overwhelming redemption demands for both local and foreign tokens, risking a drain on reserves.