Europe may struggle to contain a financial shock linked to crypto companies and banks because its crisis tools are more limited than those used in the United States during the 2023 banking crisis, a senior official at European bank UniCredit said on Thursday.
Elena Carletti, UniCredit’s deputy vice president and head of the board’s risk committee, said European authorities may not be able to guarantee deposits linked to cryptocurrencies in the same way as U.S. regulators did after the collapse of Silicon Valley Bank and Signature Bank, Reuters reported.
Speaking at a banking conference organized by IESE Business School in Madrid, Carletti said the US decision to protect all deposits, including funds held by stablecoin issuers, had helped stabilize crypto markets during the crisis.
“The same decision cannot be made easily in Europe,” Carletti said.
The comments come as European Union regulations on crypto-asset markets, known as MiCA, bring stablecoin issuers closer to traditional banks. The rules require certain stable reserves to be held in liquid assets such as bank deposits and government securities.
This link could have become an issue during the collapse of Silicon Valley Bank in March 2023. Circle, issuer of the stablecoin USDC, revealed that $3.3 billion of its reserves were held by the bank at the time of the crisis. USDC briefly lost its peg to the dollar as investors rushed to buy back the tokens.
US regulators then guaranteed all deposits with SVB and Signature Bank, including balances above federal insurance limits, helping to restore confidence in 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 pressure if large stablecoin reserve accounts come under pressure.
“This 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 this for me is a double form of weakness,” she added.
