Europe's Stablecoin Regulation Fight Centers on Fungibility and Multi-Issuance Models

The European Commission's MiCA review consultation has ignited a heated debate over the regulation of global stablecoins in Europe. At stake is the concept of fungibility, which allows for the redemption of tokens across different entities.

Multi-issuance models, used by Circle and Paxos to issue their Global Dollar and USDC respectively, are under threat from the European Systemic Risk Board (ESRB), chaired by Christine Lagarde. The ESRB argues that these models pose a risk of insolvency in times of crisis.

However, proponents of multi-issuance argue that safeguards can be put in place to mitigate this risk. They point out that existing MiCA tools, applied with safeguards, can carry the risk and that issuers can rebalance reserves across entities in practice.

The European Parliament has voted 390 to 86 in favor of allowing multi-issuance models with safeguards, but the ECB has not conceded. The formal path is now fixed: consultation closes August 31, the Commission's review report is due by mid-2027, and legislation follows.