The European Central Bank (ECB) has gained backing for a sweeping ban on multi-issuance stablecoins across the European Union, a move that could disrupt major issuers like Circle and Paxos. The European Systemic Risk Board (ESRB), a high-level group chaired by ECB President Christine Lagarde, endorsed a recommendation last week to prohibit stablecoins issued jointly in the EU and other jurisdictions, citing financial stability risks.
Regulators warn that during a market downturn, investors might rush to redeem tokens in the EU, overwhelming local reserves and exposing the bloc to liabilities from outside jurisdictions. Lagarde has repeatedly raised concerns about gaps in the EU's Markets in Crypto-Assets Regulation (MiCA), arguing that joint issuance without stricter oversight of non-EU entities creates systemic risks akin to cross-border banking crises. She stressed that unless strong equivalence regimes and safeguards for cross-border asset transfers are introduced, such models will not be permitted.
The push reflects broader fears that dollar-denominated stablecoins, which dominate 99% of the $230 billion global stablecoin market, could undermine the euro's financial sovereignty. Euro-backed tokens represent just 0.15% of the market. ECB adviser Jürgen Schaaf has warned that reliance on dollar stablecoins could weaken European monetary policy effectiveness.
Circle and Paxos, operating primarily from the U.S. with reserves in dollar cash and short-term U.S. government securities, are among the most affected. Regulators in Finland and France, overseeing their EU operations, declined to comment, as did spokespeople for the firms. The European Commission has yet to adopt an official stance, with divisions within EU institutions; some policymakers favor safeguards over an outright ban.
Meanwhile, the ECB is advancing a digital euro, with Executive Board member Piero Cipollone suggesting a potential launch in 2029 following progress in member-state talks. Additionally, nine European banks, including ING and UniCredit, plan to launch a MiCA-regulated, euro-backed stablecoin in 2026 to strengthen Europe's strategic autonomy in payments. The ECB also reaffirmed that physical euro banknotes, with over €1.6 trillion in circulation, will coexist with digital currencies in a 'dual payment future.'