EU Watchdog Urges Ban on Multi-Issuance Stablecoins to Ensure Stability

TLDR

• The European Systemic Risk Board has recommended a ban on multi-issuance stablecoins to protect the EU’s financial stability.
• The proposal targets stablecoins issued jointly within the EU and in other jurisdictions, such as Circle and Paxos.
• The European Central Bank has raised concerns over the regulation of non-EU stablecoins and potential risks to the region’s economy.
• Italy’s central bank official warned that multi-issuance stablecoins could destabilize the EU financial system.
• The European Central Bank is considering a digital euro to reduce reliance on foreign-issued stablecoins in the future.

The European Systemic Risk Board (ESRB) has recommended a ban on multi-issuance stablecoins. The policy targets stablecoins issued both within the EU and in other jurisdictions. This move could pressure regulators to restrict stablecoin operations in the region.

ESRB’s Recommendation on Multi-Issuance Stablecoins

Last week, the ESRB advised banning certain stablecoins that are issued by multiple entities across different jurisdictions. While this recommendation is non-legally binding, it could influence EU authorities to impose stricter regulations. The proposal primarily affects stablecoin issuers such as Circle and Paxos, which operate within the EU.

The ESRB expressed concerns about the stability risks multi-issuance stablecoins could bring to the financial system. An official from Italy’s central bank noted in September that these stablecoins may pose risks to the EU’s economic security. However, it remains uncertain whether lawmakers will support the recommendation or move to enact it into law.

Concerns Over Non-EU Stablecoins and ECB’s Digital Euro Plans

The European Central Bank (ECB) has raised concerns about the regulation of stablecoins issued by non-EU entities. ECB President Christine Lagarde emphasized the need for policy action to address potential gaps in the regulation of stablecoins. Her comments highlight the growing concern over the stability of the EU’s financial system in light of these digital currencies.

The ECB is also exploring the possibility of a digital euro, which could reduce reliance on foreign-issued stablecoins. ECB board member Piero Cipollone suggested that EU member states could decide on the digital euro by the end of the year. A potential launch of the digital euro could occur as early as 2029, strengthening the EU’s digital monetary infrastructure.

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