The European Central Bank (ECB) has received support for a big ban on stablecoins in the European Union (EU). This decision could affect major companies like Circle and Paxos.

The main topic of the discussion is multi-issuance stablecoins. These are tokens that are issued both in the EU and other countries but are seen as the same.

In this model, companies in the EU that are allowed to issue tokens must keep their reserves in the EU. Meanwhile, their partners outside the EU can still manage reserves for the same tokens in other countries.

A Bloomberg report says that regulators are concerned that if the market goes down, many investors in the EU will quickly try to take out their money. This could overload the local funds and lead to financial risks from outside the EU.

ECB’s Lagarde Stresses Caution on Stablecoins Considered Risky

The European Systemic Risk Board (ESRB), which is a group of important central bank leaders and EU officials led by ECB President Christine Lagarde, agreed last week to suggest that certain models should be banned, according to sources.

The guidance isn’t a law, but it pressures EU authorities to either follow the rules or explain how they will keep financial stability in other ways. Both the ECB and the ESRB chose not to say anything.

Lagarde has often said that problems in the EU’s rules for crypto assets (MiCA) put the group at risk.

At an ESRB conference, she said that allowing non-EU companies to issue bonds together without proper supervision can lead to big problems, like past banking crises. These issues can happen when there’s not enough cash on hand and reserves are too low, which can upset the financial system.

She emphasized that if strong rules and protections for cross-border asset transfers are not put in place, multi-issuance schemes will not be allowed to work in the EU.

The movement shows that people in Europe are worried that stablecoins linked to the dollar could take away some of their financial independence.

Euro-backed tokens make up only 0. 15% of the $230 billion market for stablecoins, while those tied to the US dollar make up 99% of the market.

ECB advisor Jürgen Schaaf has previously warned that depending more on dollar stablecoins might reduce the effectiveness of European monetary policy.

Circle and Paxos, which mainly work in the United States, are two companies likely to be impacted by the possible new rules. Most of their savings are kept in cash dollars and short-term U. S investments Government securities are financial products issued by the government to borrow money. They are considered safe investments because they are backed by the government.

Regulators in Finland and France, who watch over the companies’ activities in the EU, chose not to say anything about what the proposal might mean.

Representatives for Circle and Paxos did not want to say anything. However, some people who know about their views pointed out that the European Commission has previously supported the idea of multiple issuers.

The European Commission hasn’t made an official decision yet, and there are still disagreements within EU organizations. While the ECB wants strict actions, some decision-makers prefer clearer protections instead of a complete ban.

A paper released this month by Judith Arnal, a member of the Bank of Spain, warned that differences between the ECB, the Commission, and the European Parliament could harm the trust in MiCA as an important global guideline.

This change happens while Europe is discussing the creation of a digital euro. The European Central Bank started promoting this idea in 2021, but it still needs to be approved by lawmakers.

Leaders in Frankfurt say that the growth of dollar-linked stablecoins highlights the need for a European option.

Cash Will Remain as the EU Gets Ready to Introduce the Digital Euro in 2029

The ECB is trying to balance old methods with new ideas as it works on both cash and digital money. At the same time, banks in Europe are getting ready to launch their own stablecoin backed by the euro.

In August, Piero Cipollone, a member of the ECB Executive Board, stated that paper euro banknotes are still very important even though digital transactions are increasing quickly.

In a blog post, he said that cash will still be used alongside the new digital euro, calling it a “dual payment future. ” There are over €1. 6 trillion in euro banknotes currently in use, and more people are wanting cash, especially during tough times.

The ECB has suggested a law to protect people’s ability to access cash, even though there are fewer ATMs and bank branches in the area.

People are also starting to focus on the digital euro. In September, Cipollone said that the new currency might start in 2029 because euro area finance leaders are making progress on important matters, like limits on how much money customers can hold to keep their deposits safe.

Lawmakers are supposed to explain what they think by May 2026, but discussions are still continuing. Officials have said that Europe needs its own digital money to balance the increasing power of the U. S dollar-supported stablecoins and big private payment companies.

At the same time, nine European banks, including ING, UniCredit, SEB, and CaixaBank, said they will create a new stablecoin backed by euros, which will launch in 2026.

The project will follow the MiCA rules from Europe and will be located in the Netherlands, where it will apply for an e-money license.

The group said the plan aims to boost Europe’s independence in payments and provide quick, cheap transfers between countries.

The joint effort on stablecoins comes after Société Générale started a euro-backed token using the Stellar blockchain.