TLDR
- The European Banking Authority reassured that existing EU crypto rules address risks posed by stablecoins.
- The European Central Bank warned that certain stablecoins could threaten financial stability within the EU.
- The European Systemic Risk Board called for a ban on the multi-issuance model used by some stablecoin issuers.
- The EBA stated that the severity of risks from stablecoins depends on their business model and scale.
- The EBA is waiting for clarification from the European Commission on whether the multi-issuance model is allowed under EU rules.
Europe’s banking regulator has responded to concerns from the European Central Bank (ECB) about stablecoins. The ECB warned that certain stablecoins could pose risks to financial stability. However, the European Banking Authority (EBA) emphasized that existing EU crypto rules already include safeguards for such risks.
The European Systemic Risk Board (ESRB) has also raised concerns over stablecoins. It urged Brussels to consider banning the “multi-issuance” model. Under this model, firms treat tokens issued in the EU as interchangeable with those outside the bloc.
EBA responds to concerns on multi-issuance model
The ESRB’s report highlighted the potential risks from the multi-issuance model. It suggested that large redemption requests could cause instability within the EU. A spokesperson for the EBA said,
“The report reflects inherent risks, but their severity depends on the business model and scale of the stablecoin.”
The EBA also noted that the EU’s crypto rules, such as MiCA, could mitigate these risks.
“Necessary safeguards following MiCA should be put in place,” the spokesperson added.
The EBA is waiting for further clarification from the European Commission on whether multi-issuance is allowed under these regulations.
EBA to Oversee Large Stablecoins Amid Concerns
Luis del Olmo, senior expert at the EBA, stated that issuers must hold liquid assets to meet redemption requests. He explained that this approach should work globally to maintain stability. Stablecoins, though a small part of the financial system, are growing rapidly.
Tether and Circle’s USDC are among the most significant stablecoins globally. USDC is currently the largest stablecoin regulated by the EU. It has $75 billion worth of tokens in circulation.
Regulators in different EU countries share concerns about potential risks related to stablecoins. Some fear that the U.S. could prevent reserves from being transferred to Europe to meet redemption needs. The EBA will oversee large stablecoins directly, with national regulators responsible for smaller entities.
