Stablecoins, Multi-Issuance, and Reserve Location

The Stable Standard: Views from AllUnity
By Alexander Höptner, CEO of AllUnity

Stablecoin regulation gets political fast. And nothing gets muddled more consistently than the question of where reserves need to sit. My goal is to offer a clearer perspective and cut through the noise.

First, a distinction that keeps getting lost. Multi-issuance and reserve location are two different questions. Multi-issuance is about who can issue a stablecoin locally and under what license. Reserve location is about where the backing actually sits. These are being deliberately blurred in the current debate, especially when it comes to how foreign-issued stablecoins are treated and who captures the interest and where.

The reserve location question

If a stablecoin is licensed and issued in a given jurisdiction, the holder has a legal right to redeem it there. That right is meaningless if the reserves are not there to back it or are located in a jurisdiction with weaker insolvency / bankruptcy rights. 

So let’s break out two different scenarios for solving this.

Scenario one: reserves can go anywhere. 

It sounds flexible. In practice it creates an incentive to chase yield in higher-risk locations. A workaround would be to have reserves that follow the stablecoin in real time across wallets and chains globally. That would require 24/7 monitoring and simultaneous global interbank reserve rebalancing. That infrastructure does not exist yet. Without it, a stablecoin with reserves held outside its issuance jurisdiction is technically non-compliant, and no regulated entity in that jurisdiction can accept it.

Scenario two: reserves must stay in the issuance jurisdiction.

This is the compliant path but the trade-off is real when it comes to cross-border redemption. You can send a stablecoin from Frankfurt to Singapore in seconds, but the fiat off-ramp still runs through correspondent banking because the reserve is in Euro in Europe. The efficiency gain gets eaten by the legacy settlement layer underneath.

And here is the part that tends to get skipped. Reserves are still denominated in the issuance currency, and you cannot know in advance where the stablecoin will land. The friction does not disappear, it just moves somewhere less visible. Until everything is tokenized and fiat redemption is genuinely obsolete, that matters. That is still how value settles on the ground. 

Getting cross-border redemption right requires aligned frameworks, not freed reserves. We need to be able to support seamless cross-border redemption without breaking local compliance or leaning on the correspondent banking rails we are trying to move away from. That work is underway. We are not there yet.

What the multi-issuance debate is really about

Reserve location freedom does not fix cross-border redemption. It does not make stablecoins more compliant. What it does is let issuers move reserves to wherever the regulatory framework is more appealing. Reserve interest income is the core business model. 

Two things are happening at once here. Inside Europe, incumbent institutions have shaped the regulatory conversation in ways that protect their position rather than create a level playing field for all European issuers. From the outside, US issuers already licensed in the EU are pushing hardest for reserve location freedom, not because MiCAR is broken, but because of capital optimization when reserves move freely. They argue that closing down Multi-Issuance capabilities will cut off the European market, which is just not true.  

The result is a policy debate that serves neither European users nor European financial stability.

The discussion worth having is about a harmonized regulatory framework that allows licensed stablecoin issuers to passport to other jurisdictions without duplicative obligations. This would not only require aligned stablecoin rules but also harmonized redemption and insolvency frameworks too.

Looking across the major jurisdictions, the direction is right. But redemption and insolvency frameworks have yet to be seriously addressed, and that is where the next chapter of this work lives.

The MiCAR review is a genuine opportunity to get this right. Proportionate, risk-based, and interoperable is the right direction. 

Food for thought: significant stablecoin issuers licensed in the EU have to comply with extended requirements on their services, risk, reserve and operations. The relevant KPIs are calculated on a global basis. So why aren't the major US players being deemed significant under this framework?

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