ECB flags risk of financial contagion from US crypto push

Published

2 months ago

April 22, 2025

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ECB flags risk of financial contagion from US crypto push

The European Central Bank (ECB) raised an alarm over potential fallout from aggressive US support for the crypto industry, warning that a surge in dollar-backed stablecoins could destabilize Europe’s financial system.

According to a policy paper seen by Politico, the ECB has asked for a revision of the Markets in Crypto-Assets Regulation (MiCA) regulatory framework for cryptocurrencies just months after it came into effect.

The concern is that US reforms backed by President Donald Trump could flood European markets with dollar-denominated stablecoins.

The ECB fears this could trigger a flight of European capital into US assets, undermining EU financial sovereignty and exposing banks to liquidity risks.

ECB and European Commission clash over MiCA rules

While the ECB calls for tighter controls, the European Commission dismissed the warnings as exaggerated, per the report.

The report, citing two diplomats and one EU official, said that the existing MiCA framework is robust enough to manage stablecoin risks despite potential US policies like the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) and the Guiding and Establishing National Innovation for US Stablecoins (GENIUS), two bills aimed at expanding America’s crypto footprint.

“The Commission was quite clear that they had different views on this topic,” and “not very many (countries) supported the idea that we should now jump the gun and start making quick changes in (the rules) based on this alone,” one of the diplomats reportedly told Politico.

The stablecoin sector now commands a valuation of $234 billion, according to data from CoinMarketCap.

The ECB warned that European issuers could face redemption pressures from EU and foreign holders without stricter limits, potentially sparking a financial “run” and harming exposed institutions.

“The worry is warranted,” Mikko Ohtamaa, co-founder and CEO at Trading Strategy, said in a post on X. “However, the EU had the first mover advantage with the regulation and they screwed it up.”

Ohtamaa said no EU stablecoin is globally competitive due to MiCA’s restrictive rules, which are influenced by bank and legacy finance lobbying.

Tether remains a major critic of MiCA

Tether, the issuer of the world’s largest stablecoin, USDt (USDT), has long been a critic of the EU’s MiCA regulation.

Last year, Tether CEO Paolo Ardoino argued that MiCA’s requirements, particularly the mandate for stablecoin issuers to hold at least 60% of reserves in EU bank accounts, could introduce systemic risks to both stablecoins and the broader banking system.

Due to noncompliance with MiCA, USDT has faced delistings from major European exchanges, including Coinbase, Crypto.com and Kraken.

Magazine: Altcoin season to hit in Q2? Mantra’s plan to win trust: Hodler’s Digest

Politics

Chancellor Rachel Reeves says she is ‘totally’ up for the job of chancellor in first comments since tearful PMQs

Published

10 mins ago

July 3, 2025

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Chancellor Rachel Reeves says she is 'totally' up for the job of chancellor in first comments since tearful PMQs

The chancellor has said she was having a “tough day” yesterday in her first public comments since appearing tearful at Prime Minister’s Questions – but insisted she is “totally” up for the job.

Rachel Reeves told broadcasters: “Clearly I was upset yesterday and everyone could see that. It was a personal issue and I’m not going to go into the details of that.

“My job as chancellor at 12 o’clock on a Wednesday is to be at PMQs next to the prime minister, supporting the government, and that’s what I tried to do.

“I guess the thing that maybe is a bit different between my job and many of your viewers’ is that when I’m having a tough day it’s on the telly and most people don’t have to deal with that.”

Politics latest: PM sets out 10-year NHS plan

She declined to give a reason behind the tears, saying “it was a personal issue” and “it wouldn’t be right” to divulge it.

“People saw I was upset, but that was yesterday. Today’s a new day and I’m just cracking on with the job,” she added.

Ms Reeves also said she is “totally” up for the job of chancellor, saying: “This is the job that I’ve always wanted to do. I’m proud of what I’ve delivered as chancellor.”

Asked if she was surprised that Sir Keir Starmer did not back her more strongly during PMQs, she reiterated that she and the prime minister are a “team”, saying: “We fought the election together, we changed the Labour Party together so that we could be in the position to return to power, and over the past year, we’ve worked in lockstep together.”

PM: ‘I was last to appreciate’ that Reeves was crying

The chancellor’s comments come after the prime minister told Sky News’ political editor Beth Rigby that he “didn’t appreciate” that she was crying behind him at Prime Minister’s Questions yesterday because the weekly sessions are “pretty wild”, which is why he did not offer her any support while in the chamber.

He added: “It wasn’t just yesterday – no prime minister ever has had side conversations during PMQs. It does happen in other debates when there’s a bit more time, but in PMQs, it is bang, bang, bang. That’s what it was yesterday.

“And therefore, I was probably the last to appreciate anything else going on in the chamber, and that’s just a straightforward human explanation, common sense explanation.”

During PMQs, Tory leader Kemi Badenoch branded the chancellor the “human shield” for the prime minister’s “incompetence” just hours after he was forced to perform a humiliating U-turn over his controversial welfare bill, leaving a “black hole” in the public finances.

The prime minister’s watered-down Universal Credit and Personal Independent Payment Bill was backed by a majority of 75 in a tense vote on Tuesday evening – but a total of 49 Labour MPs voted against the bill, which was the largest rebellion in a prime minister’s first year in office since 47 MPs voted against Tony Blair’s lone parent benefit in 1997, according to Professor Phil Cowley from Queen Mary University.

Reeves looks transformed – but this has been a disastrous week for the PM

It is a Rachel Reeves transformed that appears in front of the cameras today, nearly 24 hours since one of the most extraordinary PMQs.

Was there a hint of nervousness as she started, aware of the world watching for any signs of human emotion? Was there a touch of feeling in her face as the crowds applauded her?

People will speculate. But Ms Reeves has got through her first public appearance, and can now, she hopes, move on.

The prime minister embraced her as he walked on stage, the health secretary talked her up: “Thanks to her leadership, we have seen wages rising faster than the cost of living.”

A show of solidarity at the top of government, a prime minister and chancellor trying to get on with business.

But be in no doubt today’s speech on a 10-year-plan for the NHS has been overshadowed. Not just by a chancellor in tears, but what that image represents.

A PM who, however assured he appeared today, has marked his first year this week, as Sky News’ political editor Beth Rigby put to him, with a “self-inflicted shambles”.

She asked: “How have you got this so wrong? How can you rebuild trust? Are you just in denial?”

They are questions Starmer will be grappling with as he tries to move past a disastrous week.

Ms Reeves has borne a lot of the criticism over the handling of the vote, with some MPs believing that her strict approach to fiscal rules has meant she has approached the ballooning welfare bill from the standpoint of trying to make savings, rather than getting people into work.

Ms Badenoch also said the chancellor looked “absolutely miserable”, and questioned whether she would remain in post until the next election.

Sir Keir did not explicitly say that she will, and Ms Badenoch interjected to say: “How awful for the chancellor that he couldn’t confirm that she would stay in place.”

Downing Street scrambled to make clear to journalists that Ms Reeves was “going nowhere”, and the prime minister has since stated publicly that she will remain as chancellor “for many years to come”.