UniCredit Vice Chairman Says Europe May Struggle to Contain Crypto-Linked Financial Crisis
Summary
- UniCredit’s vice chairman said Europe’s financial system may struggle to respond adequately in a crisis linking crypto assets and the banking sector.
- He said Europe’s deposit protection system is more limited than that of the US, and that a US-style blanket deposit guarantee would be difficult because the depositor protection cap is limited to 100,000 euros per person.
- Carletti said that if a stablecoin issuer account holding large reserve deposits comes under stress, a US-style blanket bailout would be difficult in practice, highlighting growing concerns over financial stability and the need to strengthen deposit protection frameworks.
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Europe’s financial system may not be equipped to fully contain a crisis caused by links between crypto assets and banks, raising fresh questions about risk management as stablecoins become more intertwined with the banking system.
CoinDesk reported on May 28 that Elena Carletti, vice chairman of UniCredit’s board, said Europe’s deposit protection regime is more limited than that of the US.
During the 2023 failures of Silicon Valley Bank and Signature Bank, US regulators effectively protected all deposits, she said. Europe may find it harder to take the same approach.
Carletti said Europe’s depositor protection limit is generally capped at 100,000 euros per person. If accounts held by stablecoin issuers with large reserve deposits come under stress, a US-style blanket bailout would be difficult in practice, she added.
Debate has recently intensified in Europe and the US over expanding links between stablecoins and the traditional financial system. As the crypto industry moves further into the regulatory mainstream, the need to strengthen financial stability safeguards and deposit protection frameworks is also growing.
JH Kim
reporter1@bloomingbit.ioHi, I'm a Bloomingbit reporter, bringing you the latest cryptocurrency news.
