Core Viewpoint - Europe's existing crypto regulations already include safeguards against risks associated with stablecoins, despite warnings from the European Central Bank (ECB) regarding potential threats to financial stability [1]. Group 1: Regulatory Concerns - The ECB and the European Systemic Risk Board (ESRB) have called for a ban on the "multi-issuance" model, which allows global stablecoin firms to treat EU-issued tokens as interchangeable with those issued outside the EU [2]. - The ESRB highlighted that a rush by non-EU holders to redeem EU-issued tokens could exacerbate financial instability within the bloc [2]. - The European Banking Authority (EBA) acknowledged the risks related to massive redemption requests but noted that the severity of these risks depends on the stablecoin's business model and scale [2][3]. Group 2: Safeguards and Supervision - The EBA emphasized the need for necessary safeguards following the Markets in Crypto-Assets (MiCA) regulation to mitigate risks associated with stablecoins [3]. - Issuers of stablecoins are required to maintain liquid assets to meet potential redemption requests, which should be effective on a global scale [4]. - The EBA will directly supervise significant stablecoins, while national regulators will oversee MiCA-licensed entities [5]. Group 3: Market Dynamics - Stablecoins currently represent a small segment of the financial system but are experiencing rapid growth, particularly driven by Tether based in El Salvador [5]. - Circle's USDC, the largest EU-regulated stablecoin utilizing the multi-issuance model, has $75 billion in tokens in circulation [5]. - Concerns have been raised by national regulators regarding the potential inability to transfer reserves from the U.S. to Europe to fulfill redemption requests [6].

Benzinga and Yahoo Finance LLC may earn commission or revenue on some items through the links below. Europe’s landmark crypto regulations are proving resilient to pressure from the continent’s most powerful central bank, as the European Commission signaled on Oct. 10 it won’t impose additional restrictions on stablecoin companies despite urgent warnings from the European Central Bank about financial stability risks, according to Reuters. The decision represents a significant victory for major stablecoin i ...