TLDR
- ECB and European Systemic Risk Board back ban on multi-issuance stablecoins affecting Circle and Paxos
- Regulators concerned about redemption risks when EU reserves could be overwhelmed during market stress
- Dollar stablecoins hold 99% of $230 billion market while euro tokens represent only 0.15%
- Multi-issuance model allows tokens issued in EU and abroad to be treated as identical
- European banks planning 2026 euro stablecoin launch as digital euro targets 2029 debut
The European Central Bank has gained support for banning multi-issuance stablecoins across the European Union. This decision could force Circle and Paxos to restructure their European operations.
The European Systemic Risk Board endorsed the recommendation last week. ESRB chair Christine Lagarde leads the group of central bank governors and EU officials pushing for the change.
Multi-issuance stablecoins are tokens issued both inside and outside the EU but treated as interchangeable. EU-licensed issuers hold reserves in Europe while non-EU partners manage reserves for identical tokens elsewhere.
Regulators believe this structure creates problems during market downturns. Investors could rush to redeem tokens in the EU, draining local reserves while foreign reserves remain out of reach.
The ESRB recommendation carries no legal weight. However, it increases pressure on EU authorities to adopt restrictions or provide alternative financial stability protections.
Lagarde Warns of Systemic Risks
Christine Lagarde has raised concerns about gaps in the Markets in Crypto-Assets Regulation. She compared the risks to cross-border banking crises where liquidity problems destabilized financial systems.
Lagarde stated that multi-issuance models need strong equivalence regimes and cross-border asset transfer safeguards. Without these protections, she said such schemes cannot operate in the EU.
The ECB and ESRB both declined to comment on the recommendation. Circle and Paxos also declined to provide statements.
People familiar with the companies noted the European Commission previously supported multi-issuance models. The Commission has not yet taken an official position on the ban.
Dollar Dominance Drives EU Concerns
Dollar-pegged stablecoins control 99% of the global stablecoin market worth $230 billion. Euro-backed tokens make up just 0.15% of the total.
This imbalance worries European officials about financial sovereignty. ECB adviser Jürgen Schaaf warned that dollar stablecoin reliance could weaken European monetary policy.
Circle and Paxos operate primarily from the United States. Both companies hold reserves mainly in dollar cash and short-term U.S. government securities.
Finnish and French regulators oversee their EU operations. Neither country’s financial authorities commented on the potential ban implications.
European Alternatives in Development
Divisions exist within EU institutions over the approach. Some policymakers want clearer safeguards instead of an outright ban.
Bank of Spain board member Judith Arnal warned that disagreements between the ECB, Commission, and Parliament could harm MiCA’s global credibility. Her paper was published earlier this month.
Nine European banks plan to launch a euro-backed stablecoin in 2026. ING, UniCredit, SEB, and CaixaBank are among the participants.
The project will follow MiCA regulations and operate from the Netherlands. The banks aim to strengthen European payment autonomy with instant cross-border settlement.
ECB Executive Board member Piero Cipollone suggested a digital euro launch in 2029. Finance ministers have made progress on customer holding limits and other key issues.
Lawmakers should outline their position by May 2026. Over €1.6 trillion in euro banknotes currently circulate throughout the European Union.
Regulators in Finland and France, who supervise Circle and Paxos EU operations, declined to comment on the proposal.
