Germany and Italy are pushing for sweeping new powers to block foreign stablecoin operators from entering the European Union when their home countries fail to meet EU regulatory standards, a move that could close access to one of the world’s biggest financial markets for some of the biggest crypto players, according to a document seen by Euronews.
ADVERTISEMENT
ADVERTISEMENT
The two countries detailed their positions in a joint discussion paper released on March 27, ahead of a meeting of the bloc’s Market Integration and Supervision Package (MISP) working group.
The document explicitly presents the proposal in terms of the “stability and sovereignty” of the EU, a vocabulary which shows that it is as much a geopolitical standoff as financial regulation.
A big “no” to American stablecoins?
Table of Contents
The proposal directly targets so-called multi-issuer stablecoins, tokens issued simultaneously in several jurisdictions, with reserves distributed between them.
Stablecoins are cryptocurrencies designed to maintain a stable value, typically pegged to the dollar or euro and backed by fiat currency held in reserve so that holders can convert them at any time.
“In order to ensure the stability and sovereignty of the EU financial system, it is imperative to establish a comprehensive and harmonized regulatory framework for global stablecoins originating from third-country multi-issuance schemes,” the document states.
Although the document does not cite any companies, the structure described clearly refers to the current models of the main issuers of dollar-pegged stablecoins, most of which are domiciled outside the EU, notably in the United States.
Under the envisaged framework, any such operator would be prohibited from offering tokens in the EU unless the European Commission has formally judged that its home country’s regulatory framework is equivalent to EU standards.
Without an equivalence decision, no market access. As the United States currently has no comparable framework, the proposal could de facto completely exclude major dollar-backed stablecoins from the EU.
The circuit breaker
The proposal would also give regulators a real circuit breaker.
Under the draft provision, the European Banking Authority (EBA) would be required to ban a stablecoin outright if its reserve transfer mechanism breaks down, the issuer seriously violates the rules of its home country, or if there are indications that it is acting against the interests of token holders in the EU.
The risk associated with cross-border stablecoins is simple: a stablecoin issued jointly by a US company and a European company has its cover reserves split between the two.
If all European holders try to get reimbursed at the same time, the share of reserves located in the EU may not be enough to reimburse everyone. The money exists, but it is deposited in a bank account in the United States, potentially subject to American rules that could delay or block its transfer to Europe.
Germany and Italy want to make this a legal obligation: funds must be able to be transferred instantly from the non-EU part to cover any shortfall of this type. This is, in the words of the document, to ensure that “asset reserves can be reallocated and effectively mobilized across borders towards the Union, without legal or operational obstacles, in the event of localized liquidity shortages, including in times of crisis or financial stress”.
If this guarantee cannot be respected, or if the issuer violates the rules of its home country or is found to be acting against the interests of EU holders, the European Banking Authority (EBA) would be required to shut down its activities completely, banning the stablecoin from operating in the Union.
Race against time
The urgency for this initiative comes from the European Systemic Risk Board (ESRB), the EU’s systemic risk watchdog, which has previously flagged that multi-issuer stablecoin structures carry inherent vulnerabilities and potential risks to financial stability.
His fear is that a collapse or freeze of a stablecoin would ripple through European financial markets, as a bank run can.
The ESRB called on European and national authorities to put in place safeguards by the end of 2026, then additional measures by the end of 2027.
Germany and Italy argue that these recommendations must be incorporated into ongoing MISP negotiations before the window closes.
“Timing is crucial and we must act quickly to address the financial stability and consumer protection risks posed by multi-issuance schemes in the ongoing MISP negotiations,” the document underlines.
Reinforced supervision from day one
The proposal would also place large stablecoin issuers under the direct supervision of the EBA, making participation in a multi-issuer scheme involving a third country an automatic criterion for “significant” status.
In the current framework, this status is determined by size, number of users and transaction volumes.
Germany and Italy want to add a new automatic trigger: as soon as an actor operates a cross-border split structure, it is subject to the strictest level of control from the start, whatever its size.
The MiCAR regulation, which came into force in 2024, already requires stablecoin issuers operating in the EU to hold reserves and comply with governance standards.
But the German-Italian paper believes that the current framework has gaps for cross-border schemes where the issuing entity is outside EU jurisdiction, and that these loopholes need to be closed before global adoption of stablecoins accelerates further.
This working document was sent to the “Financial Services and Banking Union” group before its meeting on March 30.
It does not constitute a fixed position of the EU, but non-papers of this type, especially when they are supported by the two largest economies of the euro zone, weigh heavily in the outcome of legislative negotiations.
