The European Central Bank (ECB) announced it will expand access to its euro liquidity facility (EUREP), making it a permanent and universally available mechanism for the central banks of all member states. The funding limit was set at €50 billion, provided funds are not excluded for reasons such as money laundering, terrorist financing, or international sanctions.
Traditionally, the ECB’s euro liquidity facilities were directed only to a few central banks, mainly in countries bordering the eurozone, with temporary agreements requiring annual renewals. With this decision, the ECB is taking an unprecedented step by making this liquidity line permanent and accessible to almost all monetary authorities worldwide, drastically expanding its geographic reach and raising its maximum threshold to €50 billion per institution.
According to Bloomberg, this expansion is part of the ECB’s attempt to “prevent market tensions and increase the global use of the single currency,” offering liquidity even when financial tensions could trigger massive sell-offs of euro-denominated assets.
This move not only strengthens the euro against the dominant role of the US dollar but also reflects a commitment to consolidating its role in the international monetary system, something that has been limited until now by the fragmentation of the European financial system and the need for agreements.
A new historical direction for European Monetary Policy
The main players in this measure are central banks and global markets. The expansion of the euro liquidity facility allows more central banks to access rapid funding during periods of financial stress, thus reducing the likelihood of liquidity crises in their respective systems. This ongoing support can incentivize investment and transactions in euros internationally, strengthening confidence in the common currency.
Furthermore, it directly targets emerging economies and their stabilization plans. From now on, countries outside the eurozone will be able to use these repo lines to bolster their capacity to respond to shocks in foreign exchange markets or adverse financial flows, provided they meet the eligibility criteria set by the ECB. “The availability of a lender of last resort for central banks worldwide increases confidence to invest, borrow, and trade in euros,” announced Christine Lagarde, emphasizing that this mechanism will strengthen the role of the euro in an increasingly unpredictable global financial environment.
Regulation directly impacts crypto assets and the regulations of the digital ecosystem. Although the official announcement does not mention cryptocurrencies or digital markets, the global financial policy context creates a clear tension with the strict regulations facing digital assets.
While the ECB strengthens a traditional, centralized instrument under rigid rules, decentralized ecosystems are affected by regulations that restrict their adoption, participation, and accessibility. This paradox underscores how existing regulatory frameworks favor traditional structures over financial technology innovations. “The ECB must be prepared for a more volatile environment,” said Lagarde, emphasizing the need for a global safety net to prevent forced sales of European assets during periods of stress.
Depth of change and regulatory tensions
Expanding access to euro liquidity represents a structural transformation in how the ECB addresses the role of the single currency in the global financial system. This shift not only provides additional financial stability during times of market stress, but also exposes the rigidity of the current traditional regulatory framework compared to the flexibility and growth of digital asset markets, which are often hampered by stringent regulations and conservative monetary policy approaches.
While some regulators seek to limit the participation of crypto assets for security or stability reasons, the ECB leverages precisely centralization and regulatory control to strengthen the euro. This highlights a paradox: the same supervisory criteria that restrict innovation in crypto, such as centralized custody requirements, market limits, or sanctions exclusions, do not prevent traditional institutions from expanding their global reach without equivalent restrictions for emerging players.
The MiCA (Markets in Crypto-Assets) regulatory framework, approved and implemented in 2024, is a clear example of how traditional entities want to prevent the implementation and opening of the crypto system across Europe at all costs. According to the regulation itself, MiCA introduces new protections but only recognizes as legal those issuers that comply with its rules, leaving out thousands of options that would benefit users and improve cryptocurrency interoperability.
