Stablecoin Risks Rise with Multi-Country Issuance: EU Framework Under Scrutiny

Stablecoins, digital tokens pegged to traditional currencies like the US dollar, have seen rapid growth in recent years. By 2025, their capitalization exceeded $300 billion. However, this expansion has raised concerns about run risks, particularly with multi-country issuance (MCI) of these stablecoins.

Authors Edoardo D. Martino, Eric Monnet & Enrico Perotti argue that MCI creates vulnerabilities due to redemption arbitrage across regulatory borders. They note that the EU's framework provides stronger redemption protections than the US, potentially encouraging holders to redeem tokens through EU-issued coins during stress periods.

This could shift redemption pressure and run risk from US issuers onto their EU counterparts. To mitigate these risks, the authors propose contingent redemption measures, including charges or temporary redemption gates triggered when withdrawals exceed a predefined threshold. These automatic stabilizers would aim to create functional equivalence with US redemption rules and reduce incentives for investors to shift redemption pressure toward Europe during market stress.

The researchers also suggest a 'systemic exception' mandate for the ECB, allowing it to intervene in extreme circumstances by suspending withdrawals of non-euro stablecoins. Their broader analysis examines stablecoin design and run mechanics, comparing the EU's MiCAR regime with the US GENIUS Act, and evaluates regulatory options for reducing dollar-stablecoin risks while protecting European monetary sovereignty.