Plug Stablecoin Loopholes to Avert Euro Systemic Risks, Italy Warns

The Bank of Italy has called for stricter regulatory frameworks to address risks associated with multi-issuance stablecoins, emphasizing the need for legal clarity and uniform standards to protect financial stability. Deputy Governor Chiara Scotti highlighted the growing tensions between the European Central Bank (ECB) and the European Commission over the governance of cross-border stablecoin issuance, particularly in models where tokens are issued by both EU and non-EU entities Bank of Italy urges clarity on rules for multi-issuance stablecoins^[1]. Scotti noted that such structures could create mismatches between obligations and reserves, exposing the EU to operational, liquidity, and systemic risks, especially when non-EU issuers lack equivalent regulatory safeguards Italy Touts Stricter Oversight on Multi-Issuer Stablecoins^[2].

The Bank of Italy’s concerns center on the potential for regulatory arbitrage, where non-EU stablecoin issuers might bypass stringent EU requirements under the Markets in Crypto-Assets (MiCAR) framework. Scotti argued that multi-issuance models—where identical tokens are issued across jurisdictions—could lead to concentrated redemption demands in the EU, straining reserves and undermining consumer protections. To mitigate these risks, the central bank urged that stablecoin issuance be restricted to jurisdictions adhering to equivalent regulatory standards, ensuring redemption at par and cross-jurisdictional crisis protocols Bank Of Italy Seeks Rules For Multi-Issuance Stablecoins, Australia Offers Exemptions^[3].

The European Commission has faced pressure to clarify whether EU-licensed firms’ stablecoins can be treated interchangeably with those issued by non-EU subsidiaries. While the Commission reportedly believes such interchangeability is permissible under current rules, the ECB has raised alarms about financial stability risks. Scotti emphasized that third-country issuers may not comply with MiCAR’s consumer protection and transparency mandates, creating “regulatory blind spots” Bank of Italy urges clarity on rules for multi-issuance stablecoins^[1]. The Bank of Italy’s stance aligns with broader EU efforts to strengthen oversight, as MiCAR’s implementation in 2023 has not fully resolved ambiguities in cross-border operations Italy Touts Stricter Oversight on Multi-Issuer Stablecoins^[2].

Scotti also underscored the importance of cross-border cooperation among supervisors to monitor reserve adequacy and enforce consistent standards. She noted that while stablecoins offer benefits like 24/7 availability and lower transaction costs, only those pegged to a single fiat currency are suitable as payment instruments. This distinction is critical, as multi-issuance models complicate reserve management and increase the likelihood of systemic disruptions Italy Touts Stricter Oversight on Multi-Issuer Stablecoins^[2]. The Bank of Italy’s call for stricter rules reflects a broader European trend, with ECB President Christine Lagarde recently urging similar measures to address non-EU stablecoin risks .

The debate over stablecoin regulation is intensifying as global competition among jurisdictions heats up. The U.S. has introduced a stablecoin framework under President Donald Trump’s administration, while China is reportedly considering a yuan-backed stablecoin. These developments highlight the urgency of harmonizing international standards to prevent risks from “seeking the path of least resistance,” as Lagarde warned . For the EU, the challenge lies in balancing innovation with the need to safeguard financial stability, particularly as stablecoins grow in scale—reaching $271.3 billion in U.S. dollar-pegged supply as of September 2025 .

The Bank of Italy’s proposals underscore the EU’s determination to assert regulatory leadership in the stablecoin space. By advocating for equivalence regimes and stricter cross-border safeguards, Italian authorities aim to close loopholes that could erode trust in the euro and destabilize the broader financial system. As discussions continue, the focus will remain on aligning global standards to ensure stablecoins operate within a framework that prioritizes transparency, resilience, and consumer protection Bank of Italy urges clarity on rules for multi-issuance stablecoins^[1].