Europe\u2019s financial risk regulator wants stronger regulations governing \u201cmulti-issuer\u201d stablecoins.<\/p>\n
At its meeting Thursday (Oct. 2), the European Systemic Risk Board<\/a> (ESRB) said there should be stricter guidelines covering these coins, which are issued partly in the European Union and partly in other jurisdictions, according to a Thursday press release<\/a>.<\/p>\n \u201c[T]he general board stressed that third country multi-issuer schemes\u2014with fungible stablecoins issued both in the EU and outside\u2014have built-in vulnerabilities which require an urgent policy response,\u201d the release said. \u201cMembers also took note that multi-function groups may operate under regulatory regimes which are much more lenient than for financial conglomerates, raising the question of divergent prudential standards.\u201d<\/p>\n The ESRB\u2019s warning echoes one from the European Central Bank<\/a>, which is worried that the failure of multi-issuer stablecoins<\/a> could lead to a run on reserves.<\/p>\n The ESRB met last week and passed a recommendation to prohibit \u201cmulti-issuance\u201d stablecoins<\/a>. The board\u2019s guidance is not legally binding but will pressure governments in the EU to impose the limits or explain how their countries can still preserve financial stability without them.<\/p>\n Stablecoins are pegged to assets such as the U.S. dollar and typically rely on a one-to-one reserve of traditional funds to back their value. With the multi-issuance model, licensed stablecoin providers issuing coins in the EU need to maintain a local reserve in at least one member state while still issuing and managing reserves for functionally identical coins in other parts of the world.<\/p>\n Advertisement: Scroll to Continue<\/p>\n Meanwhile, Federal Reserve<\/a> Governor Christopher Waller<\/a> and Bundesbank<\/a> President Joachim Nagel<\/a> offered different points of view on stablecoins<\/a> Monday (Sept. 29) at the Sibos<\/a> conference in Frankfurt, Germany.<\/p>\n Waller said the private sector is better positioned to innovate than central banks, and that stablecoins offer an attractive way for people in countries beyond the United States to access dollar banking services.<\/p>\n Nagel, a member of the ECB governing council, said stablecoins present \u201cpreviously unknown risks,\u201d and that the \u201canchor role\u201d of central bank money must be maintained.<\/p>\n