A New Flashpoint in Europe’s Crypto Oversight
The European Systemic Risk Board (ESRB) has raised red flags over the rapid expansion of so-called multi-issuer stablecoins—digital currencies backed by several companies or collateral structures operating across borders. The board cautioned that such systems, if left unchecked, could create vulnerabilities comparable to those seen in the pre-2008 shadow banking sector.
The ESRB’s latest financial stability report, released this week, calls for “urgent policy attention” to address the growing number of privately managed stablecoins circulating beyond the EU’s direct regulatory perimeter. These assets, while marketed as safe and fully collateralized, often rely on fragmented reserves held in multiple jurisdictions—making coordinated oversight nearly impossible.
An ESRB spokesperson summarized the concern: “When stability depends on a web of issuers outside the same legal framework, the risk of contagion and loss of confidence multiplies.”
How Multi-Issuer Stablecoins Work
Unlike single-issuer stablecoins such as USDC or Tether, multi-issuer models involve several entities jointly minting tokens under shared branding or through decentralized collateral systems. These networks claim to improve liquidity and transparency by distributing control.
However, the ESRB notes that such dispersion of responsibility introduces serious governance and redemption risks. If one participant faces insolvency or regulatory penalties, the entire token system could lose credibility—potentially triggering market-wide instability.
Financial analysts have drawn parallels between these structures and “synthetic asset vehicles” that amplified the 2008 financial crisis. In both cases, layers of interdependence obscure where real risk resides.
MiCA’s Limitations Exposed
Europe’s flagship crypto law, the Markets in Crypto-Assets (MiCA) framework, officially took effect earlier this year. Yet the ESRB’s latest findings suggest that even MiCA may not be equipped to handle the next generation of multi-issuer projects.
While MiCA establishes licensing and reserve standards for stablecoin providers, it assumes a single accountable entity. Multi-issuer networks can easily fall between regulatory cracks—especially if some participants are based outside the European Economic Area.
ESRB chair Claudia Buch said during a policy session, “MiCA is an important step, but the landscape is evolving faster than legislation. We must now think beyond single-entity regulation toward systemic oversight.”
The Global Stakes
The timing of the warning comes as major stablecoin issuers expand their global footprint. U.S. dollar-backed tokens remain dominant, but Europe has seen the rise of new euro-linked coins issued by fintech alliances and DeFi protocols.
The ESRB’s report warns that “the proliferation of partially regulated stablecoins could weaken monetary transmission,” implying that uncontrolled private money issuance could challenge the European Central Bank’s ability to manage liquidity and interest rates.
Market analysts say this concern echoes earlier ECB warnings about the potential “digital euro gap” — the fear that if private tokens dominate European digital payments before the ECB issues its own digital currency, public trust in the euro could erode.
Industry Reaction
Stablecoin issuers have responded cautiously. A spokesperson for a leading euro-backed stablecoin said the industry “welcomes regulatory dialogue” but argued that “multi-issuer models enhance resilience, not risk.”
DeFi developers, meanwhile, have warned that excessive restrictions could drive innovation offshore. “Europe risks repeating its fintech mistakes if it overregulates emerging token models,” said Felix Andersen, CTO of the decentralized payment project NordPay.
Still, traditional banks appear to back the ESRB’s stance. Several major institutions have privately expressed concern that complex stablecoin networks could undermine payment settlement stability, especially during market stress events.
What Comes Next
Policymakers are already preparing a follow-up initiative informally dubbed MiCA 2.0, which would expand supervision to multi-issuer systems, algorithmic tokens, and decentralized collateral frameworks. The ESRB is expected to advise the European Commission on possible measures before the end of 2025.
Among the options being considered are:
- Mandatory EU residency for at least one governing entity in multi-issuer structures.
- Unified reporting standards for collateral and reserve composition across issuers.
- Stress tests similar to those applied to banks, assessing redemption capacity during extreme market volatility.
Regulators also hinted at the potential creation of a centralized European Stablecoin Registry, allowing authorities to monitor token flows and reserve updates in real time.
A Fight for Monetary Sovereignty
The ESRB’s warning marks a pivotal moment for Europe’s digital finance strategy. As blockchain innovation accelerates, policymakers must balance competition with control over the continent’s monetary foundation.
If multi-issuer stablecoins continue to expand without coordinated safeguards, Europe could face a parallel currency system operating beyond the reach of traditional oversight.
For the crypto industry, the message is clear: regulatory coordination is no longer optional—it’s existential.