EU Moves to Ban Dollar-Dominated Stablecoins, Targeting Circle and Paxos

The European Central Bank is rallying support for a sweeping prohibition on multi-jurisdictional stablecoins, a move that WOULD force US issuers like Circle and Paxos to fundamentally restructure their EU operations. This regulatory offensive comes as euro-denominated stablecoins represent just 0.15% of the $230 billion global market.

Christine Lagarde's ECB argues current MiCA regulations contain dangerous loopholes, drawing parallels to vulnerabilities in cross-border banking systems during the 2008 crisis. The proposed ban specifically targets redemption mechanisms that could leave EU reserves depleted during market stress while offshore holdings remain inaccessible.

Nine European banks are preparing a MiCA-compliant euro stablecoin for 2026, positioning themselves against the ECB's own digital euro project slated for 2029. This creates a three-way regulatory race between legacy dollar stablecoins, private euro alternatives, and central bank digital currency.