Stablecoins are no longer a curiosity of crypto markets. They are quietly becoming the infrastructure of digital finance: the settlement rails for tokenised assets, the liquidity of decentralised markets and, increasingly, a proxy form of cash for investors who no longer wish to wait for banks to reopen on Monday morning.

By November 2025, total stablecoin capitalisation had already crossed $300bn, according to the latest US Federal Reserve . Days later, US Treasury Secretary Scott Bessent told lawmakers the market could grow roughly , hitting $3trn. That would make stablecoins one of the largest private monetary instruments in existence.

Yet in recent months the , the and the have all ratcheted up their warnings about the risks of , a drumbeat that is already giving potential investors pause. At the same time, nine European banks have established a new company in the Netherlands to launch a euro stablecoin, with for the second half of 2026, underscoring how quickly the market is moving ahead of the rulebook.

But the regulatory pipeline is not exactly overflowing. Since the Markets in Crypto-Assets Regulation (MiCA) rules on electronic-money tokens began to apply in June 2024, the European market for licensed EMTs has barely flickered into life. As of October 2025, only 29 EMTs had been registered across the EU, corresponding to just 15 e-money institutions and 2 banks. Two of those licences are in Luxembourg, for Banking Circle SA and . “In terms of volume they seem to be growing slowly, probably because this is still a new business model in the EU and there is a learning period as in any new activity,” an EBA spokesperson told Paperjam.

Which is why Europe’s latest dilemma--whether to allow joint issuance of stablecoins with foreign providers, or to permit a fully licensed issuer under MiCA to operate across all 27 member states via passporting rules, thereby opening the door to a vast commercial and retail investor base--matters far more than it first appears.

On the surface, the idea seems harmless: an EU entity and a third-country firm mint the same token, fully fungible across borders, producing seamless liquidity. In practice, this “multi-issuance” model blurs the lines and could determine who controls the settlement layer of the next financial era, and in which currency it operates.

Redemptions do not care about borders

Consider the mechanics. A token minted in New York can be redeemed in Frankfurt at par, provided both issuers are part of the same multi-issuance structure. During good times, this is merely a technical detail. But in a moment of stress, foreign-issued tokens may be redeemed en masse against EU reserves.

The threat is not crypto volatility but the familiar dynamics of liquidity strain. If large numbers of foreign holders rush for the exit, EU entities must honour those claims, draining their own reserves. That risk can transmit pressure into banks holding those reserves, undermining consumer protections that were designed precisely to prevent such spillovers.

Regulatory arbitrage

Even more concerning, a multi-issuance structure would allow foreign issuers to benefit from the implicit credibility of EU rules, such as MiCA, without actually following them. Requirements designed to cap issuance, protect consumers or manage operational risk can be sidestepped if a foreign issuer’s tokens are treated interchangeably with those minted inside the EU.

The effect is a form of regulatory fusion in which EU supervisors become responsible for liabilities created abroad, with no meaningful oversight of the entity creating them. For a union that has spent a decade reinforcing banking supervision, this is regulatory logic turned inside-out.

Whose money powers tokenised Europe?

This debate becomes even more consequential against the backdrop of extreme market concentration. Stablecoins are overwhelmingly dollar-denominated, with up to 99% of issuance linked to the US currency, according to .

This means, tokenisation platforms, which increasingly rely on deep, programmable and liquid settlement instruments, will therefore naturally gravitate to the only products with genuine global scale--the dollar stablecoins.

In effect, letting non-euro stablecoins take hold in the EU is not a neutral technical choice--it is an open invitation for dollar tokens to become the default settlement asset in Europe’s own digital markets!

A quiet drain on European savings

It is not just about currency symbolism--the consequences would be felt in EU household savings too. Where stablecoin reserves are invested matters. Dollar stablecoins park most of their backing in short-term US government securities, not in European assets.

If European investors end up holding these tokens at scale, the bloc will be funnelling its savings into foreign sovereign debt rather than into its own bonds, banks or capital-market instruments. In other words, Europe would be helping to deepen someone else’s capital markets while still struggling to complete its own.

That is the exact opposite of the EU’s stated ambition to strengthen its sovereign bond markets and build a genuine homegrown capital-markets union.

And what does Europe gain? Surprisingly little

Advocates of multi-issuance often present it as a “digital innovation” strategy. But most of the value creation--reserve management, investment gains, technology development--tends to sit with the home jurisdiction of the lead issuer. The EU arm of a multi-issued stablecoin could easily become a legal shell with minimal operational substance.

The high-skill jobs, product engineering and treasury functions would remain abroad. The investment returns on the reserves--now substantial thanks to higher global interest rates--would also accrue where the parent company is domiciled, not where the tokens circulate.

Finally, why it really matters

Once the numbers are taken seriously, the stakes become clear. A market already exceeding $300bn, plausibly heading for $3trn, is no longer a speculative niche. It is an emerging global settlement layer. If Europe cedes control of that layer, it is not just losing a product market--it is handing away a slice of its monetary sovereignty and its say over everything built on top of it: tokenised securities, digital bonds, automated financial contracts and cross-border business flows.

This is increasingly the question being put--sometimes politely in speeches, sometimes bluntly behind closed doors--how much monetary sovereignty is Europe willing to trade for imported innovation and dollar liquidity?

Allowing multi-issuance without structural protections may look like a technical tweak, a small concession to market reality. But Trojan horses never arrive looking dangerous. They arrive looking useful. The next few choices will determine whether this dollar stablecoin remains outside the gates--or whether Europe wakes up one day to find it has already been wheeled into the heart of its monetary system.