The European Systemic Risk Board (ESRB), which is made up of authorities from Europe’s central banks, has published a report on three cryptoasset issues that it sees as key to their rapid growth: stablecoins, crypto investment products (CIP) and multifunctional groups (GMF).
The report, which was shared by the Central Bank of Spain, emphasizes the risks coming from stablecoins, called stablecoins in Spanish, issued both by entities in the European Union (EU) and outside the region.
Global stablecoin capitalization has more than doubled since the report on cryptoassets and decentralized finance that the ESRB published just over two years ago, in May 2023. “This growth is due, in part, to the United States’ policies on cryptoassets that promote the adoption of stablecoins denominated in US dollars,” notes the ESRB.
The organization highlights that stablecoins and traditional finance are increasingly interconnected, even through reserves in commercial banks that support their reference values (pegs). Consequently, the report highlights the need to ensure that eligible reserve assets in the EU are of high quality and liquid.
In turn, the report indicates that cryptocurrency investment products are increasingly accessible to institutional and retail investors, as part of the growing integration of the sector into traditional finance, which poses hidden risks to regulating them.
It specifies that the GMF that offer these products can operate with opaque corporate structures and resort to cross-border regulatory arbitrage practices. “This can pose challenges for effective supervision, particularly when groups are based outside the EU,” he clarifies. The report therefore calls for formal supervisory cooperation mechanisms and reporting obligations.
In addition to this, this highlights the risks to financial stability derived from stablecoins issued jointly by entities in the EU and third countries.
Underlines that stablecoins issued jointly by entities in the European Union and third countries present inherent vulnerabilities and generate risks for financial stability in the region.
On the one hand, he points out that A massive stablecoin run could prompt holders to request a refund of the European Union issuer, adding pressure to its reserves, which would delay repayments and amplify massive withdrawals within the bloc.
On the other hand, it adds that the restrictions imposed by third country authorities on the transfer of reserves between jurisdictions could aggravate these risks in periods of tension.
“The EU Regulation on Markets in Crypto Assets (MiCA) does not explicitly provide for the joint issuance of stablecoins by EU and third country entities and therefore cannot address the associated risks,” warns the ESRB, which an action plan is necessary.
Along these lines, the ESRB recommends that the European Union clarify the schemes permitted under the current framework of the MiCA Regulation before the end of 2025. Failing this, it urges the relevant authorities (such as the European Commission, the European Supervisory Authorities and national supervisory authorities) to mitigate the risks to financial stability arising from such schemes through appropriate safeguards.
In his view, safeguards should include, for example, strengthened supervisory measures, closer international cooperation and the introduction of necessary legal reforms. AND It is expected that the majority of these will be implemented in 2026 and the rest before the end of 2027..
The ESRB anticipated that it will monitor the implementation of this recommendation and clarified that the underlying authorities must communicate the measures adopted in response to this report, in addition to justifying the reason in case of inaction.
This initiative, as CriptoNoticias has been reporting, is in line with the progress of European organizations in terms of defining and applying regulations on the cryptocurrency ecosystem, such as the registry of virtual asset service providers maintained by Spain.