A proposal has been quietly circulating in Brussels that few people have fully grasped. Italy and Germany — two countries that rarely align on highly technical policy issues — have jointly submitted a document that could redraw the future of stablecoins in Europe. The term at the center of it is blunt: kill switch. An emergency mechanism, managed by the European Banking Authority (EBA), capable of blocking a foreign stablecoin overnight. It sounds drastic. But the logic behind it is less extreme than it first appears.
The document was circulated on March 27th, ahead of a working group session on the European MISP package (Market Integration and Supervision Package). Rome and Berlin argue that MiCA — the EU's crypto regulatory framework in force since 2024 — has dangerous gaps when it comes to stablecoins issued by companies headquartered outside the European Union. And they point the finger at a specific problem: Circle and its USDC.
The Problem Nobody Wanted to Name
The mechanism at issue is called a multi-issuer scheme, and it works like this: Circle issues a single, fungible version of USDC for both the US and European markets. Circle's French subsidiary — which obtained an EMI license from the Banque de France — is required to redeem any quantity of USDC presented to it. On paper, that all looks fine. The problem is that the reserves backing those European USDC tokens are largely held in the United States.
In normal conditions, this doesn't matter much. But imagine a moment of panic — a digital bank run — where European users all try to convert their USDC into euros at once. Circle's French entity doesn't physically hold sufficient reserves. The money exists, but it's locked in American accounts, subject to American rules, on American timelines. Europe would be left facing a shortfall it cannot fill independently.
Banks, sceptical policymakers and traditional payments firms alike are crossing their fingers that the stablecoin revolution fizzles rather than roars in 2026 https://t.co/AkTB5yFOrp
— The Economist (@TheEconomist) November 27, 2025
How the Italy-Germany Kill Switch Would Work
The joint proposal contains three substantive changes to the existing regulatory framework. First: any issuer operating a multi-issuer scheme — meaning one that relies on reserves held outside the EU — would be automatically classified as "significant" by the EBA, regardless of size or transaction volume. That means direct supervision, stricter requirements, and no escape route through small-scale operations.
Second: reserves must be instantly mobilizable to the European entity, free of legal or operational barriers, at any moment of crisis. Not "within X days." Immediately. Third: the EBA would gain the power to directly ban a stablecoin if the reserve transfer mechanism fails, if the issuer seriously violates the rules of its home jurisdiction, or if it becomes clear the issuer is acting against the interests of European users.
The document is unambiguous: "The time factor is decisive. We must act early." The deadline to integrate these measures into the MISP negotiations is end of 2026.
Circle and USDC: Europe's most compliant stablecoin is suddenly in the spotlight
The irony is not lost on industry observers. Circle was the first major company to achieve MiCA compliance, back in July 2024, through its French subsidiary Circle SAS. USDC remained, in practice, the only heavyweight stablecoin truly regulated in Europe after Tether's exit. Now it finds itself at the center of a proposal that could force it to completely overhaul its operating model.
LATEST: 📊 Euro-pegged stablecoins could explode 1,600x to €1.1 trillion by 2030 as 11 European banks prepare to launch a joint euro stablecoin in late 2026, according to S&P Global Ratings. pic.twitter.com/aO5faRR287
— CoinMarketCap (@CoinMarketCap) February 4, 2026
The global stablecoin market has surpassed $318 billion — nearly double the 2023 figure. Ninety-nine percent of that is denominated in US dollars. For Europe, which built MiCA precisely to avoid being governed by Washington's rules, that number is as impressive as it is alarming.
Washington vs. Brussels: Two Worlds Not Talking to Each Other
Behind this story lies a structural conflict between two incompatible visions. The American GENIUS Act — the legislation shaping stablecoin regulation in the United States — was designed to attract issuers, not constrain them. MiCA was designed to constrain, not attract. Diametrically opposed goals. And the two sides are, for now, not coordinating at all.
The US Treasury published the GENIUS Act's implementing rules on April 1, 2026, opening a 60-day comment period. The full system won't be operational before November 2026. Meanwhile, Europe is moving ahead on its own. The Italy-Germany proposal asks the EBA to assess whether the regulatory framework of an issuer's home country is "equivalent" to EU standards. But if the American system isn't yet in force, how can that equivalence even be evaluated?
What This Means for Crypto Users in Europe
For ordinary users, at least in the short term, very little changes. USDC remains available on MiCA-compliant European platforms. Tether has already effectively disappeared from regulated European exchanges since March 2025. What does change — and could change significantly in the coming months — is the level of scrutiny applied to foreign issuers.
Users holding USDC don't need to panic right now. But anyone operating a crypto exchange or services platform in Europe will need to monitor the MISP negotiations very closely. A change in the regulatory framework could impose new operational obligations, additional compliance costs, and in extreme cases, forced delistings.
What Rome and Berlin are ultimately saying is simple: European reserves must be in Europe, full stop. This is not an anti-crypto position. It is a question of financial sovereignty. And on that point, it's hard to argue with them.
