Europe may soon gain the power to shut down global stablecoins with a single regulatory move.
Germany and Italy have proposed a new framework that would allow the European Union to block foreign stablecoin operators unless their home countries meet EU regulatory standards. The proposal targets cross-border stablecoins that split their reserves across multiple jurisdictions — a structure regulators say could pose serious risks during financial stress.
If approved, the plan would give the European Banking Authority the ability to activate a regulatory “kill switch.” This means a stablecoin could be banned from operating in the EU if its reserve transfer system fails, if it violates home-country regulations, or if authorities believe it is acting against EU users’ interests.
The concern is simple: if European investors rush to withdraw funds, the EU-based reserves might not be enough to cover everyone — while the remaining backing sits in banks outside the EU, potentially restricted by foreign laws.
The proposal is part of broader discussions under the EU’s Market Integration and Supervision Package. While it is not yet law, the push from two of the eurozone’s largest economies could significantly shape the future of global crypto regulation.
If adopted, the move could dramatically impact major dollar-backed stablecoins and reshape how crypto companies operate inside one of the world’s biggest financial markets.
