Stablecoin Crackdown: European Central Bank Gathers Backing For Joint Issuance Ban

The European Central Bank (ECB) is reportedly gaining traction in its pursuit of a ban on multi-issuance stablecoins across the European Union (EU). This move comes in light of recommendations from the European Systemic Risk Board (ESRB), which is tasked with safeguarding Europe’s financial integrity. Multi-Issuance Stablecoins Under Fire Last week, the ESRB approved a recommendation that advocates for a prohibition on multi-issuance ￰0￱ familiar with the discussions, told Bloomberg that this guidance was sanctioned by a board comprising central bank governors and EU ￰1￱ the multi-issuance model, licensed providers in the EU are required to hold local reserves in at least one member state while simultaneously managing reserves for identical tokens issued ￰2￱ ECB, under the leadership of President Christine Lagarde, has been a vocal advocate for the proposed ban, stressing the need for clearer safeguards around the operation of such stablecoins within the European ￰3￱ implications for existing stablecoin companies, such as Paxos and Circle (CRCL) , which are already licensed to operate under the multi-issuance framework, remain ￰4￱ Concerns Over Financial Stability Both Paxos and Circle primarily operate out of the US, known for its crypto-friendly regulations under President Donald Trump’s vision of transforming America as the “crypto capital of the world”, which has raised concerns among some European ￰5￱ have been repeatedly voiced by ECB officials regarding the potential risks posed by these dollar-pegged stablecoins to both financial stability and monetary sovereignty in ￰6￱ has previously warned that foreign holders of stablecoins may create significant “legal and operational risks” for European Union-based issuers, emphasizing the need for regulatory ￰7￱ this, the European Central Bank does not have direct authority over the implementation of regulations governing digital assets in the ￰8￱ European Commission has yet to adopt an official stance on the ￰9￱ Arnal, a board member at the Bank of Spain and an associate senior research fellow at the Centre for European Policy Studies, highlighted in a recent paper that the ongoing debate over multi-issuance stablecoins poses a more profound challenge to the credibility of the Markets in Crypto-Assets (MiCA) ￰10￱ cautioned that a regulatory landscape characterized by disputes among the ECB, the Commission, and the European Parliament could send a troubling message internationally, suggesting that MiCA may be fragile and open to varying ￰11￱ conjunction with these developments, the ECB has been working since 2021 to establish a central bank digital currency (CBDC) tied to the euro, although it is still waiting for the necessary legal framework to move ￰12￱ image from DALL-E, chart from ￰13￱