European Banking Authority says existing EU crypto rules (MiCA) already cover the risks linked to stablecoins

Regulatory authorities in Europe are addressing the risks of stablecoins and pushing for tighter controls. 

In contrast to the United States’ fragmented regulations for stablecoins, European policymakers have made a unified system that they believe will promote innovation, protect consumers, and improve financial stability.

Existing crypto rules can handle stablecoin risks

Despite the recent warnings from the European Central Bank (ECB) and the European Systemic Risk Board (ESRB) about potential threats stablecoins pose to financial stability, the Europe Banking Authority is insisting that the EU’s existing cryptocurrency regulations already protect against those risks.

The EU has been implementing its crypto law called the Markets in Crypto-Assets Regulation (MiCA). It is the world’s first comprehensive structure for supervising digital assets. The European Banking Authority (EBA), which oversees major crypto issuers, believes the current rules already provide the necessary tools to manage the liquidity and redemption risks associated with stablecoins, especially those pegged to fiat currencies like the U.S. dollar or the euro.

A spokesperson for the EBA agreed with the ESRB’s recent report that correctly highlighted the risks associated with “potential massive redemption requests,” but added that these risks depend heavily on how individual stablecoin issuers operate and the scale of the business. 

“Based on these elements, necessary safeguards following MiCA should be put in place to mitigate the risk,” the spokesperson said.

The ECB and ESRB have urged Brussels to consider placing tighter limits on how stablecoin firms operate within and outside the bloc. The two bodies called for a ban on the “multi-issuance” model, where global stablecoin companies, like those behind USD Coin (USDC) or Tether (USDT), treat tokens issued in the EU as interchangeable with those circulating elsewhere. 

The ESRB, led by ECB President Christine Lagarde, warned that this setup could cause significant financial damage and a liquidity crisis if investors outside the EU suddenly redeem their tokens issued in the EU. 

One official told Reuters they fear that if many investors try to withdraw funds at once, the U.S. could block the movement of dollar reserves to Europe, making it harder for issuers to pay redemptions.

MiCA already provides safeguards 

Under MiCA, which began taking effect earlier this year and will be fully implemented in 2026, stablecoin issuers must maintain adequate reserves, meet transparency obligations, and submit to regulatory supervision by national authorities. The most significant stablecoins will be supervised directly by the EBA.

Luis del Olmo, a senior expert at the EBA, told Reuters that stablecoin issuers need to manage their liquidity in a way that they can meet potential redemption requests. “And this should work at a global level,” he added.

Stablecoins are still a relatively small part of the global financial system, but their influence is growing quickly due to major issuers such as Tether, which is based in El Salvador, and Circle’s USDC. Circle’s euro-regulated USDC stablecoin has around $75 billion in circulation, making it the largest EU-regulated token of its kind.

The EBA said it is still waiting for clarification from the European Commission on whether multi-issuance structures are allowed under MiCA.

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