Europe’s stablecoin crackdown pits dollar-backed tokens against euro sovereignty, as private crypto collides with central bank money.
Crypto media outlets with the info, in summary.
The European Central Bank is pushing for a ban on so-called multi-issuance stablecoins in the EU, a move that could hit issuers like Circle and Paxos. These models allow tokens to be jointly issued inside and outside the bloc, but regulators fear EU reserves could be drained in a crisis while liabilities spill over from abroad.
The European Systemic Risk Board, chaired by ECB President Christine Lagarde, backed the ban last week. Although not binding, the endorsement pressures EU lawmakers to tighten MiCA rules or justify alternative safeguards. Lagarde has warned the current framework leaves the bloc vulnerable, likening the risks to past cross-border banking crises.
The push reflects concern that dollar-denominated stablecoins, which make up 99% of the $230bn market, could undermine European financial sovereignty. Euro-backed stablecoins account for just 0.15%. Officials argue this heightens the urgency of a digital euro, with a 2029 launch being targeted.
Meanwhile, a consortium of nine banks including ING, UniCredit and CaixaBank plan to launch a euro-backed stablecoin in 2026 under MiCA rules. The ECB has also pledged to safeguard physical cash as part of a “dual payment” system, even as digital options expand.
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Stablecoins are cryptocurrencies pegged to assets such as the U.S. dollar or euro, designed to keep a steady value. The biggest — Tether (USDT) and USD Coin (USDC, issued by Circle) — are dollar-backed and dominate 99% of the $230bn global stablecoin market.
Why does Europe care?
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Financial stability: Regulators fear runs on stablecoins during market stress could drain reserves and destabilize financial systems.
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Sovereignty: Heavy use of dollar-backed tokens could undermine the euro’s role in payments and monetary policy.
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Cross-border risk: “Multi-issuance” stablecoins (issued in both the EU and abroad but treated as identical) could leave EU reserves exposed to liabilities outside the bloc.
What is MiCA?
The Markets in Crypto-Assets Regulation (MiCA) is the EU’s flagship crypto law, passed in 2023. It requires stablecoin issuers to hold reserves in Europe, meet disclosure rules, and cap transactions for certain tokens. Critics say loopholes remain, especially on joint issuance with non-EU partners.
What is the ECB proposing?
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Ban multi-issuance models: ECB President Christine Lagarde argues they pose systemic risks similar to cross-border bank crises.
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Push for euro alternatives: Euro-backed stablecoins currently account for only 0.15% of the market.
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Digital euro project: ECB is targeting a 2029 rollout, aiming to provide a public, euro-denominated digital payment option.
What else is happening?
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Bank-backed euro stablecoin: A group of nine European banks plans to launch a regulated euro token in 2026.
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Cash stays: Despite digital efforts, the ECB has pledged to safeguard euro banknotes, keeping a “dual payment future” of cash and digital money.
