Finance
EU risk watchdog calls for urgent safeguards on stablecoins
Published by Global Banking and Finance Review
Posted on October 2, 2025
2 min readLast updated: January 21, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on October 2, 2025
2 min readLast updated: January 21, 2026
The EU financial watchdog calls for urgent regulation on stablecoins to prevent financial risks and liquidity issues, especially in multi-issuer schemes.
FRANKFURT (Reuters) -The European Union's financial risk watchdog called on Thursday for urgent safeguards on stablecoins only partly issued in the bloc, echoing a warning from the European Central Bank, which is worried that their failure could induce a run on reserves.
Stablecoins are a type of cryptocurrency designed to hold a steady value by being pegged to a reserve asset such as a currency or basket of assets.
The EU has put in place one of the world's strictest regimes on crypto assets but policymakers worry that issuers originating from outside the bloc enjoy easier regulation and could import financial risk.
"The General Board stressed that third country multi-issuer schemes – with fungible stablecoins issued both in the EU and outside – have built-in vulnerabilities which require an urgent policy response," the European Systemic Risk Board, headed by ECB President Christine Lagarde, said in a statement.
EU rules require stablecoins to be fully backed by reserves. Lagarde said the bloc should hold companies that issue stablecoins both in the EU and abroad to the same standards.
In "multi-issuer" schemes, an EU and a non-EU entity jointly issue stablecoins, and the strict EU regulation does not extend to the non-EU issuer, tilting the playing field.
The main worry is that in the event of a run on the asset, investors will choose to redeem in the EU, since it has the strongest safeguards.
However, reserves held in the EU may not be sufficient to meet concentrated demand, creating a liquidity squeeze in the bloc and potentially forcing the ECB to respond.
"Multi-function groups may operate under regulatory regimes which are much more lenient than for financial conglomerates, raising the question of divergent prudential standards," the ESRB added.
(Reporting by Balazs Koranyi; Editing by Hugh Lawson)
A stablecoin is a type of cryptocurrency designed to maintain a stable value by being pegged to a reserve asset, such as a currency or a basket of assets, to reduce volatility.
Liquidity refers to how easily an asset can be converted into cash without significantly affecting its price. High liquidity means assets can be quickly sold or bought.
A regulatory framework consists of the laws, regulations, and guidelines that govern financial institutions and markets to ensure stability, transparency, and compliance.
Financial stability is a condition where the financial system operates effectively, with institutions able to withstand shocks, maintain confidence, and facilitate economic growth.
Risk management is the process of identifying, assessing, and prioritizing risks followed by coordinated efforts to minimize, monitor, and control the probability or impact of unfortunate events.
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