Crypto regulation in the world weekly digest #166
The EU
The EU is moving to ban multi-issuance stablecoins – tokens issued both within the EU and internationally – due to concerns about systemic risk and EU monetary sovereignty. This proposal from the European Systemic Risk Board (ESRB), strongly backed by the European Central Bank and its President Christine Lagarde, directly targets companies like Circle, which operates under a multi-issuance model with reserves split across jurisdictions. We also recall, that Tether’s USDT is already restricted for the Block’s licensed exchanges. On the other hand, Circle’s current structure, compliant with EU’s MiCA rules, segregates EU reserves for EU-issued tokens but still allows its USDC tokens to move across borders, making them fungible globally.
Now, the ESRB argues this model is risky: in a crisis, EU investors could be left with claims on reserves held outside the EU. There’s fear of a “bank run” scenario, where redemptions in the EU drain reserves meant to protect EU users. If the ban is implemented, Circle may be forced to restructure its European business. Options include creating tokens exclusively for the EU (with no cross-jurisdictional fungibility), limiting redemptions to within the EU, or possibly withdrawing USDC from the European market.
The move could accelerate the adoption of MiCA-compliant euro-backed stablecoins, encourage banks to issue their own tokens, and fuel the development of a digital euro, with Circle needing to adapt or potentially scale back in the region.
The ESRB’s recommendation is not yet legally binding but is likely to pressure EU regulators to push through restrictions unless they can prove that financial stability is guaranteed by other means. A clash exists between the ECB/ESRB and the European Commission, with some arguing that current MiCA rules are sufficient and others demanding tighter controls. Major changes to Circle’s European operations are a likely outcome if the policy becomes law, which may happen within the next year as regulators debate the issue and banks prepare their own products.
The UAE
The International Monetary Fund has officially commended the United Arab Emirates for its advancements in the Digital Dirham central bank digital currency framework. The IMF specifically recognized the UAE for its enhancements to the Dirham monetary system, progress with the Digital Dirham rollout, and its proactive approach to stablecoin regulation. The Fund highlighted the UAE’s ongoing efforts toward modernization, calling for sustained risk assessment and robust regulatory coordination, especially as the country rapidly emerges as a global hub for virtual assets and crypto development.
The IMF praised the UAE for aligning with international standards and strengthening its supervisory capacity as part of a larger focus on safeguarding financial stability and fostering responsible innovation. The Fund welcomed the UAE’s implementation of a comprehensive AML/CFT strategy, which contributed to the nation’s removal from enhanced monitoring under the Financial Action Task Force (FATF).
The UAE’s Ministry of Finance also recently joined the global Crypto-Asset Reporting Framework, pledging to automatically exchange crypto asset information with other jurisdictions starting in 2028, which the IMF considered an important step toward tax transparency.
In August 2025, the Central Bank of the UAE confirmed preparations to launch the Digital Dirham by the end of the year, with infrastructure supporting P2P, retail, wholesale, and cross-border transactions. The Digital Dirham is expected to be accessible through a regulated digital wallet, offering programmable money and supporting tokenization and smart contract functionality.
India
India’s Finance Minister Nirmala Sitharaman has recently emphasized that nations — including India — must prepare to engage with stablecoins, regardless of whether policymakers fully welcome them. In her remarks at the Kautilya Economic Conclave 2025, Sitharaman highlighted that stablecoins are transforming global money and capital flows and warned that countries face a binary choice: adapt to these new monetary architectures or risk exclusion from the evolving financial system.
Sitharaman stated that "whether we welcome these shifts or not, we must prepare to engage with them", explicitly referring to the rising role and inevitability of stablecoins in digital finance. She acknowledged stablecoins’ growing usage for cross-border payments and remittances — a significant issue for India given its large volume of incoming remittances — and pointed to stablecoins’ potential to reduce transaction costs and improve efficiency.
While India to date has maintained tough taxation and regulatory hurdles for private cryptocurrencies, Sitharaman’s comments signaled a potential pivot from prohibition toward “constructive engagement,” echoing momentum seen in the US and over 130 countries exploring forms of central bank digital currencies (CBDCs).
The Finance Minister’s speech is seen as a pragmatic acknowledgment that outright bans or isolation from stablecoin adoption could leave nations behind in global trade, remittances, and monetary innovation. Sitharaman reaffirmed India’s economic resilience but called for vigilance, continuous regulatory evolution, and cooperation to safeguard stability while harnessing new technologies.
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