UniCredit warns Europe may struggle to contain crypto-bank crisis under MiCA rules
EU deposit insurance (up to €100,000) may not absorb stress from large stablecoin reserve accounts, unlike the full protection offered by U.S. regulators.
What to know:
- Europe lacks crisis tools used by the U.S. to contain crypto-bank shocks, raising concerns about its ability to handle future financial turmoil.
- EU deposit insurance (up to €100,000) may not absorb stress from large stablecoin reserve accounts, unlike the full protection offered by U.S. regulators.
- MiCA forces stablecoin providers to align with banks, but without extended deposit insurance, creating a “double weakness” in the European financial system.
Speaking at a banking conference hosted by Madrid’s IESE Business School, Carletti said the U.S. decision to protect all deposits, including funds held by stablecoin issuers, helped stabilize crypto markets during the crisis.
“The same decision cannot be easily taken in Europe,” Carletti said.
The comments come as the European Union’s Markets in Crypto-Assets regulation, known as MiCA, pushes stablecoin issuers closer to traditional banks. The rules require certain stablecoin reserves to be held in liquid assets such as bank deposits and government securities.
That link could have become a problem during the Silicon Valley Bank collapse in March 2023. Circle, issuer of the USDC stablecoin, revealed that $3.3 billion of its reserves were held at the bank at the time of the crisis. USDC briefly lost its dollar peg as investors rushed to redeem tokens.
