European committee: ‘Ban American stablecoins’

The European Systemic Risk Board (ESRB) calls for a ban on so-called multi-issuance stablecoins. With this recommendation, it wants to urge European regulators to limit dependence on foreign digital currencies and protect the EU’s monetary sovereignty.

European concerns about foreign influence are increasing

The ESRB recommendation targets stablecoin issuers such as Circle (USDC) and Paxos (USDP), which issue their tokens in multiple jurisdictions. They do this while their reserves are only in one EU member state. According to a report by Bloomberg, the move highlights growing concerns about foreign control within the European financial system.

Although the ESRB opinion is not legally binding, it has significant influence. The council, chaired by ECB President Christine Lagarde, consists of central bank governors and senior EU officials. Their recommendations put pressure on national regulators to take action.

Lagarde has long been an outspoken critic of stablecoins. She is particularly against stablecoins backed by US dollar reserves. According to her, such assets pose “significant legal, operational, liquidity and financial stability risks at EU level”. In doing so, she places the discussion explicitly in the context of European monetary independence.

Field of tension between European and American interests

An internal ECB presentation from April showed that stablecoin reserves often consist of dollar denominations outside the euro area. According to the central bank, this could undermine the European objectives of the Savings and Investment Union and weaken control over capital flows.

Supporters of the ESRB point to the recently passed GENIUS Act in the United States. This law actually requires issuers to hold dollar-backed assets, such as current accounts and short-term US government bonds. This development is seen in Europe as an argument for limiting the multi-issuance model.

A ban would mainly affect US stablecoin issuers such as Circle and Paxos, both of which have EU licenses but largely keep their reserves in the US. Although the parties involved have not yet responded, sources point out that the ECB position conflicts with the previous policy of the European Commission, which wanted to leave room for this type of stablecoins.