New York's Department of Financial Services and the European Banking Authority signed a 22-page memorandum of understanding on Tuesday to coordinate stablecoin oversight across the $314 billion sector. The agreement establishes procedures for sharing supervisory and confidential information between the regulators, including protocols for flagging emergency situations such as serious operational or financial difficulties of supervised entities. The coordination reflects how stablecoins are enabling cross-border capital flows while blurring jurisdictional boundaries between regulatory agencies, prompting transatlantic alignment on oversight standards.
NYDFS and EBA Establish Emergency Coordination Protocols
The memorandum commits both regulators to flag issues to each other as quickly as possible during crisis situations. In cases involving serious operational or financial difficulties of supervised entities, the NYDFS and EBA will coordinate responses in their respective jurisdictions. The agreement specifies that regulators will attempt to prevent each other from being blindsided by issues originating from across the Atlantic.
The NYDFS described the measure as an effort to enhance oversight, identify market trends and risks, and promote market integrity. The regulator noted that the scope of the initiative is limited to actions companies under its supervision may take.
Regulators Commit to Information Sharing on Investigations
Upon request, the authorities are committed to sharing information regarding civil or criminal investigations. The agreement details procedures intended to facilitate the exchange of supervisory and confidential information as it relates to the stablecoin sector.
The coordination framework includes provisions for responding to depegging events, where a stablecoin trades at a discount to the currency it represents. In 2023, Circle's dollar-pegged USDC stablecoin briefly dropped as low as 87 cents after the firm confirmed it had exposure to the implosion of Silicon Valley Bank.
ECB Official Warns of Stablecoin Run Risks
The coordination comes as European Central Bank board member Isabel Schnabel warned last week at a conference in South Korea that stablecoins are "subject to the risk of runs" and threaten to erode Europe's monetary sovereignty and economic control. Schnabel noted that "virtually all stablecoins in circulation are denominated in dollars," with other currencies playing a negligible role.
The agreement between the NYDFS and EBA is not legally binding. NYDFS Acting Superintendent Kaitlin Asrow described international coordination as "essential for the digital asset space" in a statement, citing consumer and market protection as the driving rationale.
FAQ
What did the NYDFS and EBA agree to on Tuesday?
The New York Department of Financial Services and European Banking Authority signed a 22-page memorandum of understanding on Tuesday to coordinate stablecoin oversight. The agreement establishes procedures for sharing supervisory and confidential information, including protocols for flagging emergency situations involving serious operational or financial difficulties of supervised entities.
Why are regulators coordinating on stablecoin oversight?
The coordination reflects how stablecoins are enabling cross-border capital flows while blurring jurisdictional boundaries between regulatory agencies. The NYDFS described the measure as an effort to enhance oversight, identify market trends and risks, and promote market integrity across the $314 billion stablecoin sector.
What concerns did the ECB raise about stablecoins?
European Central Bank board member Isabel Schnabel warned last week that stablecoins are "subject to the risk of runs" and threaten to erode Europe's monetary sovereignty and economic control. She noted at a conference in South Korea that virtually all stablecoins in circulation are denominated in dollars, with other currencies playing a negligible role.
