The European Systemic Risk Board has approved a recommendation to ban stablecoins issued across multiple jurisdictions, according to Bloomberg. The European Central Bank proposed the measure, which received backing from national EU financial regulators and other ESRB members.
The move could potentially impact major stablecoin issuers like Circle and Paxos, both of which hold licenses under the EU’s Markets in Crypto-Assets regulation as well as New York state approval and licenses in other jurisdictions. A ban would likely push EU residents toward foreign stablecoins and fragment blockchain adoption across regions.
The ECB aims to protect EU investors against a global bank run scenario. Stablecoins like USDC maintain separate reserves for EU holders distinct from reserves in other jurisdictions. While reserves are segregated, the stablecoin tokens themselves remain fungible across borders. MiCA requires direct redemption rights for stablecoin holders, unlike the US GENIUS Act. The ECB fears that during a crisis, foreign stablecoin holders could drain EU reserves through redemption, exploiting these more permissive rights. This could leave EU holders with claims against foreign issuers, defeating the purpose of local reserves.
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