Europe may struggle to contain a financial shock linked to crypto firms and banks because its crisis tools are more limited than those used in the United States during the 2023 banking turmoil, a senior official at European bank UniCredit said on Thursday.
Elena Carletti, assistant vice president at UniCredit and head of the board’s risk committee, said European authorities may not be able to guarantee crypto-linked deposits in the same way that U.S. regulators did after the collapses of Silicon Valley Bank and Signature Bank, Reuters reported.
At a banking conference hosted by IESE Business School in Madrid, 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 made easily in Europe,” Carletti said.
The comments come as the European Union’s regulation of cryptoasset markets, known as MiCA, brings stablecoin issuers closer to traditional banks. The rules require that certain stablecoin reserves be held in liquid assets such as bank deposits and government securities.
That link could have become an issue during the collapse of Silicon Valley Bank in March 2023. Circle, issuer of the USDC stablecoin, revealed that $3.3 billion of its reserves were in the bank at the time of the crisis. USDC briefly lost its peg to the dollar as investors rushed to redeem tokens.
US regulators subsequently 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 insurance system, which typically protects up to 100,000 euros ($116,500) per depositor per bank, may not be able to absorb similar stress if large stablecoin reserve accounts come under pressure.
“That means that we are forcing a certain alliance of stablecoin and cryptocurrency providers with the banking sector without the possibility of extending insurance in the same way, and that to me is a double form of weakness,” he added.
