Europe may struggle to contain an economic shock linked to crypto firms and banks because its crisis tools are more limited than those used in the US during the 2023 banking crisis, a senior official at European bank UniCredit said on Thursday.
Elena Carletti, UniCredit’s vice-chairman and head of the board’s risk committee, said European authorities may not be able to guarantee crypto-linked deposits in the same way US regulators did after the collapses of Silicon Valley Bank and Signature Bank, Reuters reported.
At a banking conference organized by Madrid’s IESE Business School, Carletti said the US decision to protect all deposits, including funds held by stablecoin issuers, helped stabilize crypto markets during the crisis.
“The same decision cannot be easily made in Europe,” Carletti said.
The comments come as the EU’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 an issue 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 in the bank at the time of the crisis. USDC briefly lost its dollar peg as investors rushed to redeem the tokens.
US regulators later guaranteed all deposits at SVB and Signature Bank, including balances above federal insurance limits, helping to restore confidence in the crypto markets.
Carletti warned that Europe’s deposit guarantee scheme, which generally protects up to 100,000 euros ($116,500) per deposit per bank, may not be able to absorb similar stress if large stablecoin reserve accounts come under pressure.
“This means we are forcing some alliance of stablecoin and crypto providers with the banking sector without the ability to extend the insurance in the same way, and that to me is a double kind of weakness,” she added.
