The European Systemic Risk Board (ESRB) has published a new report warning that financial stability risks from crypto-assets are increasing as stablecoins and other crypto products become more deeply integrated with traditional finance. The report highlights three core areas of concern: stablecoins, crypto‑asset investment products, and multi‑function groups (corporate groups offering a mix of crypto, financial and non‑financial services). It notes that global stablecoin market capitalisation has more than doubled since the ESRB’s previous assessment in May 2023, a trend the ESRB links in part to US policy support for US‑dollar stablecoins. As stablecoin reserves are increasingly held in commercial banks and other traditional instruments, stress in stablecoins can more easily transmit into the banking system, money markets and non‑bank financial institutions. A central focus of the warning is multi‑jurisdiction, multi‑issuer stablecoin schemes, where fungible tokens are issued both inside and outside the EU by related entities. The ESRB argues that this model has “built‑in vulnerabilities” for the EU, including the risk of runs concentrating on EU issuers, strains on reserve assets, and possible restrictions by third‑country authorities on the movement of reserves during stress. Because the Markets in Crypto‑Assets Regulation (MiCAR) does not explicitly envisage jointly issued EU/third‑country stablecoins, current rules may be insufficient to address these risks. In response, the ESRB has adopted a formal Recommendation (ESRB/2025/9) urging the European Commission to clarify that such schemes are not permitted under MiCAR, and, failing that, calling on EU and national authorities to introduce safeguards such as tighter supervision, enhanced international cooperation, and legal reforms by 2026–2027. Beyond stablecoins, the report flags that crypto‑asset investment products are now widely accessible to both institutional and retail investors, with issuance and service provision highly concentrated among a small set of largely non‑EU firms. This concentration, combined with opaque links between crypto firms and non‑bank financial institutions, raises the risk that shocks in crypto markets could spill over into mainstream finance. The ESRB also warns about multi‑function groups engaging in cross‑border regulatory arbitrage under less stringent regimes than those applied to traditional financial conglomerates, complicating oversight and crisis management. Overall, the message from the ESRB is that as crypto integrates more fully into the financial system, EU policymakers need to move quickly to close regulatory gaps—especially around cross‑border stablecoins—to reduce the likelihood that future crypto stress episodes force central banks or public authorities to intervene to contain systemic fallout.

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