Multi-Issuance Stablecoin Risks Prompt EU Regulatory Review

Stablecoins have been in the spotlight lately, and for good reason. A multi-issuance stablecoin is one type of stablecoin that has regulators concerned. This type of stablecoin allows separate entities in different jurisdictions to issue interchangeable versions of the same stablecoin.

The concern among EU regulators is how reserves and redemption claims work when issuers operate under different legal systems. Large redemption flows could put pressure on EU-based reserves during market stress, making it harder for them to meet redemption demands. Cross-border reserve transfers may also become harder during a crisis if legal or regulatory restrictions apply.

The MiCA framework was not designed specifically with third-country multi-issuer stablecoin structures in mind. This creates uncertainty about how the framework should apply when interchangeable tokens, reserves, and issuers are spread across jurisdictions. The EBA has identified risks from multi-issuance stablecoins schemes as a priority and called for the regulatory framework to be strengthened.

The review of MiCA is ongoing, with a focus on strengthening the regulatory framework and ensuring that EU authorities have sufficient oversight of cross-border activities. This includes determining how reserves should be managed, how redemption claims should work, and what EU supervisors can require from connected third-country entities.