A UniCredit executive stated that the EU is pushing stablecoin issuers further into the banking system under the MiCA rule, but Europe's existing crisis management tools and deposit protection arrangements may not be sufficient to cope with the next shock caused by the cross-risk between crypto institutions and banks.
Deposit protection cap becomes a focal point
According to Reuters, Elena Carletti, vice chairman and head of the board's risk committee at UniCredit, said at a banking conference that European regulators may not be able to provide full guarantees for large deposits related to the crypto industry as the US did during the 2023 banking crisis.
She noted that after the collapses of Silicon Valley Bank and Signature Bank, U.S. regulators also provided protection for deposits exceeding federal insurance limits, including funds held by stablecoin issuers. This practice helped stabilize market sentiment quickly at the time.
In Europe, deposit protection schemes typically only cover depositors with a maximum of €100,000 in each bank. For massive stablecoin reserve accounts, this limit is clearly insufficient to cover all risks.
MiCA strengthens the link between stablecoins and banks.
MiCA requires a portion of stablecoin reserves to be held in the form of highly liquid assets, including bank deposits and government securities. This means that stablecoin issuers will have closer ties with traditional banks.
This arrangement can help improve reserve transparency and liquidity during stable periods, but it could also transmit stablecoin redemption pressures to the crypto market more quickly when banks are under pressure.
During the Silicon Valley Bank crisis in March 2023, Circle, the issuer of USDC, disclosed that approximately $3.3 billion in reserves were held at the bank. Following this announcement, USDC briefly deviated from its $1 peg, leading to a surge in investor redemptions and rapidly amplifying market volatility.
Europe faces a "double vulnerability"
Carletti believes that Europe's current problem is that, on the one hand, regulators are pushing for a deeper connection between stablecoins and banks, while on the other hand, there is no extended deposit protection instrument similar to that in the United States.
She called this situation a “double vulnerability.” Once large stablecoin reserve accounts come under pressure, the European financial system may find it more difficult to cut off the transmission of risk in the short term.
From a market perspective, this statement once again highlights that stablecoin regulation is not just a matter of issuance rules, but also relates to reserve custody, bank risk isolation, and crisis management capabilities. As MiCA continues to be implemented, how Europe handles the risk connection between stablecoins and the banking system may become a key focus of subsequent regulatory discussions.
