In a statement to Reuters, Europe’s banking authority confirmed that existing cryptocurrency regulations in the EU incorporate protections against the risks associated with stablecoins, following the European Central Bank’s warnings about potential threats to financial stability. The ECB, along with the European Systemic Risk Board (ESRB), has recommended that Brussels consider prohibiting the ‘multi-issuance’ approach, which allows global stablecoin companies to treat EU-issued tokens as interchangeable with those issued elsewhere. The ESRB, led by ECB President Christine Lagarde, highlighted in a report the risk of rapid redemptions by non-EU holders of EU-issued tokens exacerbating market instability within the bloc. Responding to these concerns, a spokesperson for the European Banking Authority (EBA) acknowledged the risks tied to large-scale redemption requests but noted that the severity of these risks varies depending on each stablecoin’s business model and scale. The EBA stated that necessary safeguards aligned with the Markets in Crypto-Assets (MiCA) regulation should be established to mitigate these risks. They are currently seeking clarification from the European Commission on the acceptability of the multi-issuance model under MiCA. Stablecoin issuers assert they maintain dollar reserves for facilitating redemptions; however, Luis del Olmo, an EBA senior expert, emphasized that issuers must have sufficient liquid assets globally to address potential redemption demands. While stablecoins remain a relatively small segment of the financial sector, their rapid growth is largely driven by Tether, based in El Salvador. Circle’s USDC stands out as the largest EU-regulated stablecoin employing a multi-issuance structure, with $75 billion in tokens outstanding. National regulators supervise MiCA-licensed entities, but the EBA will take on direct oversight of significant stablecoins. According to sources familiar with two national regulators, they share the ECB and ESRB’s concerns, particularly regarding the risk that the U.S. might hinder the transfer of reserves to Europe for redemption purposes. The European Commission has indicated that it does not foresee significant changes to MiCA at this time.