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Europe may struggle to deal with risks linked to links between cryptoassets and banks, unlike US authorities who managed to limit the damage during the Silicon Valley Bank (SVB) crisis in 2023, said the deputy vice-president of the Italian bank UniCredit.
The collapse of SVB shook cryptocurrency markets because it held deposits backing some companies in the sector, destabilizing a major stablecoin and triggering a wave of redemptions. The shock reverberated throughout the banking system, contributing to the bankruptcy of Signature Bank.
Elena Carletti, deputy vice president of UniCredit and chair of the board’s risk committee, said Europe may not be able to extend blanket protection to deposits linked to cryptocurrency businesses in the event of similar turmoil.
US authorities invoked a “systemic risk” exception that guaranteed all deposits, including those of cryptocurrency businesses, helping to stabilize markets.
“Coverage and protection… was given to all deposits, including those of stablecoin companies, which also helped maintain the stability of stablecoins,” Carletti said at a banking conference hosted by the IESE business school in Madrid.
“The same decision cannot be made easily in Europe,” she added.
Stablecoins, digital assets pegged to traditional currencies, are backed by deposits or government bonds and are subject to particular regulatory attention because they link cryptocurrency to traditional finance.
The European Union’s MiCA digital assets regulation requires issuers of stablecoins, known as electronic money tokens (EMT), to hold reserves in the form of bank deposits or similar low-risk liquid assets, thereby closely linking them to lenders.
“This means that we are imposing a certain alliance between stablecoin and cryptocurrency providers and the banking sector without the possibility of extending insurance in the same way, and this represents for me a double weakness,” Ms. Carletti said.
