EU Watchdog Pushes Ban on Multi-Issuer Stablecoins

The European Systemic Risk Board (ESRB), the EU’s primary financial crisis watchdog, has taken a significant step toward tightening control over the cryptocurrency sector. According to a Bloomberg report, the board passed a formal recommendation last week calling for a ban on certain stablecoins issued jointly in the EU and other jurisdictions. While this policy recommendation lacks immediate legal force, it represents a clear signal to national regulators and financial authorities across the 27-member bloc that coordinated action may be necessary.

The ESRB’s move specifically targets what it terms ‘multi-issuance stablecoins’ – digital assets backed by multiple entities operating across different regulatory jurisdictions. This structure creates what European authorities perceive as regulatory blind spots, where no single jurisdiction has complete oversight over the entire stablecoin operation. The recommendation comes as stablecoins have grown from niche crypto instruments to potential systemic financial tools, with their combined market capitalization now exceeding $160 billion globally.

Although non-binding, the ESRB’s position carries substantial weight within European financial circles. The board’s recommendations typically pressure national authorities to align their regulatory approaches, creating de facto standards across the EU. This particular warning could prompt immediate scrutiny of existing stablecoin arrangements and deter new multi-jurisdictional offerings from launching in European markets.

The ESRB’s recommendation directly implicates major stablecoin issuers operating in European markets, particularly Circle and Paxos. Both companies have established significant presence in the region while maintaining operations across multiple global jurisdictions. Circle’s USDC and Paxos’s stablecoins would potentially fall under scrutiny if European authorities implement the board’s suggested restrictions.

For these companies, the EU represents a critical market where clear regulatory guidelines have been developing through initiatives like the Markets in Crypto-Assets (MiCA) regulation. The ESRB’s intervention suggests that even under existing frameworks, European authorities remain concerned about stablecoins that operate across jurisdictional boundaries. This creates immediate uncertainty for issuers who have built their business models around serving global markets from multiple operational bases.

The timing of this development is particularly significant as stablecoin issuers have been expanding their European operations in anticipation of MiCA’s full implementation. The ESRB’s recommendation indicates that additional restrictions beyond MiCA’s current provisions may be forthcoming, potentially forcing issuers to reconsider their operational structures and compliance strategies in one of the world’s largest economic blocs.

The ESRB’s action represents the latest escalation in a series of warnings from European financial authorities about stablecoin risks. Just weeks before the board’s recommendation, European Central Bank President Christine Lagarde publicly called for policymakers to address what she characterized as dangerous regulatory gaps, specifically highlighting stablecoins issued by non-EU entities. Lagarde’s comments signaled high-level concern about the potential for regulatory arbitrage and oversight challenges.

This concern was echoed in September by an official at Italy’s central bank, who warned that multi-issuance stablecoins posed specific risks to the EU’s financial stability framework. The official noted that the cross-jurisdictional nature of these assets could complicate crisis management and create contagion channels during periods of market stress. These coordinated warnings suggest a unified front is forming among European financial authorities regarding the perceived dangers of multi-jurisdictional stablecoin operations.

The regulatory focus appears to be intensifying as stablecoins become more integrated into traditional financial systems. European authorities are particularly concerned about scenarios where a stablecoin issued across multiple jurisdictions could experience stress or failure, creating cross-border financial stability challenges that no single regulator has clear authority to address. This preemptive regulatory stance reflects lessons learned from previous financial crises where jurisdictional gaps exacerbated systemic risks.

The ESRB’s recommendation marks a significant development in the EU’s approach to cryptocurrency regulation, potentially setting the stage for more restrictive policies toward cross-border digital assets. While the current recommendation focuses specifically on multi-issuance stablecoins, it could signal broader concerns about cryptocurrency operations that span multiple regulatory jurisdictions without clear oversight frameworks.

This regulatory direction aligns with the EU’s general approach to financial regulation, which emphasizes comprehensive oversight and clear accountability structures. The preference appears to be moving toward stablecoin arrangements where a single, clearly identifiable entity within the EU bears responsibility for compliance and stability. This could force restructuring among current market participants and create opportunities for EU-based entities to develop alternative stablecoin models that meet regulatory expectations.

For the broader cryptocurrency industry, the ESRB’s stance represents another data point in the global regulatory fragmentation of digital assets. As different jurisdictions develop varying approaches to stablecoin oversight, issuers may face increasing complexity in operating across borders. The EU’s position could influence regulatory discussions in other major economies, potentially setting a precedent for how jurisdictions address the cross-border aspects of digital currency operations in their financial stability frameworks.