Stablecoin or Central Bank Money as the Cash Leg: The ESCB Says Fallback, Industry Says Choice

Executive Summary

In September 2026 the European System of Central Banks (ESCB), the European Banking Authority (EBA) and the banks’ association AFME answered the Commission’s MiCA review consultation. Read together, they show an open dispute over what should settle a tokenized securities trade: a stablecoin, a bank deposit or central bank money. The ESCB says central bank money should anchor wholesale settlement and that a stablecoin should be a fallback. AFME says market participants should be free to choose the settlement asset. The European Banking Authority (EBA) does not rank the assets at all. Its worry is a different one: who stands behind a stablecoin that is issued in two jurisdictions at once.

For an issuer choosing a cash leg, the stake is concrete. The claim your investors hold, the interest you may or may not pass on, and the venues that accept the asset all depend on that choice. Nothing in the law has changed yet, so your offering document should say which cash leg it assumes and what happens if that assumption fails.

This article is based on public documents read on 1 October 2026. It is general information, not legal advice.

Key Takeaways

• The ESCB response treats tokenized central bank money as the “risk-free settlement anchor” and e-money tokens (EMTs) as a fallback for market infrastructures where central bank money is not practicable or available.
• AFME, a bank-led association, takes the opposite starting point: participants should choose the settlement asset that fits their needs, and MiCA-regulated stablecoins are very beneficial for settling tokenized instruments.
• The sharpest split is multi-issuance, not stablecoin versus central bank money. The ESCB says third-country schemes lack a legal basis in MiCA. AFME and Circle want them kept.
• All three sources agree on two points: keep the ban on interest, and tokenized deposits stay deposits under banking law.
• The Commission’s own December 2025 proposal sits between the camps: central bank money first, EMTs allowed for depositories only on conditions.

What the Law Says Today

Three kinds of cash leg are in play. They differ in who owes you the money.

Two further MiCA rules shape the stablecoin column. Under Article 54, at least 30% of the funds received for an EMT sit in separate accounts at credit institutions, and the rest goes into highly liquid, low-risk assets in the same currency. Under Article 56(2), when several issuers issue the same EMT, significance is assessed on their combined data.

The settlement hierarchy already exists in a different law. Article 5(8) of the DLT Pilot Regulation lets a competent authority exempt a CSD operating a DLT settlement system from Article 40 of the CSD Regulation, provided it settles on a delivery-versus-payment basis. Payments are then to settle in central bank money, including in tokenized form, where practical and available. Where that is not so, the CSD may use its own accounts, commercial bank money or e-money tokens. Recital 34 adds that central bank settlement on a ledger could count as not practical and available if it simply does not exist on that ledger.

That last sentence is the one to hold on to. Until 21 September 2026 there was no live Eurosystem service to point at. Now there is one.

The Dispute, Point by Point

The table compares what each source says in its own response. The ESCB and the EBA answered the Commission’s targeted consultation of 20 May 2026 on the MiCA review. AFME published its answer on 30 September 2026. Circle, a stablecoin issuer rather than an association, published a summary of its answer on 1 October 2026.

Where they agree

On interest, the three public sources line up. The ESCB wants the ban kept and extended to rewards, liquidity mining and unregulated lending or staking that replicate interest. The EBA answers the same question with the same choice. AFME agrees but adds a caveat: if the US permits stablecoin remuneration while the EU does not, MiCA stablecoins could be at a competitive disadvantage and the position should be reviewed.

On reserves, the direction is shared and the pace is not. The ESCB asks for the deposit floor to go, and Circle and AFME ask for a more flexible rule. The EBA says there may be benefit in a rigorous cost-benefit analysis of reducing it, and in the same answer repeats its October 2025 concern that the Commission’s proposed changes would water down the quality of non-deposit reserve assets.

On tokenized deposits, all sources want the legal boundary clearer. The EBA and the ESCB both ask for a harmonized definition of deposit in the banking rules. The EBA says it will report on classification in Q4 2026.

Where they split

Whether a stablecoin is a first choice or a fallback. The ESCB response says financial market infrastructures should use EMTs as a settlement asset only where tokenized central bank money is not practicable or available, with risk safeguards that go beyond the issuer’s soundness to settlement finality, redemption at par, intraday liquidity and convertibility under stress. AFME wants a multi-money system with central bank money, commercial bank money and stablecoins, and says each use case depends on central bank money actually being available. The two positions meet at the word “available”. They differ on who should decide when that test is met.

Multi-issuance. MiCA addresses it only for issuers inside the EU. For asset-referenced tokens, Article 36(5) requires a single reserve and Article 37(2) a single custody policy where different issuers issue the same token. The EBA notes that MiCA does not refer to third-country schemes and that two e-money institutions currently take part in such schemes, both with USD tokens. The Commission’s consultation text states that MiCA does not currently prohibit multi-issuer models. The ESCB reads the text the other way: the permissibility of third-country schemes can be established only by amendment. The EBA sits in between. It does not ask for a ban, but recommends a dedicated regime, a new significance criterion and prior supervisory non-objection if such schemes stay.

What counts as settlement-grade. The ESCB would permit settlement in EMTs only if the token is issued by an EU entity under MiCA and is not fungible with any crypto-asset issued outside the EU, including those in third-country multi-issuer schemes. AFME and Circle argue that a prohibition would fragment liquidity and push users to channels outside EU supervision.

Where the Commission’s Own Draft Sits

The Commission’s December 2025 proposal (COM(2025) 943) on capital market integration, still in negotiation, already contains a settlement hierarchy. We read three pieces of it.

• CSDs. The proposed Article 40 of the CSD Regulation says a depository settles cash payments in central bank money where practical and available. A new Article 54c would let a CSD settle in EMTs only if the token is classified as a significant EMT by the EBA, settlement uses pre-funded accounts, participants can access enough of the token, and risk and cost information is clear.
• DLT Pilot. The proposal would require payments in EMTs to use a token referencing an official EU currency, unless the instrument being settled is denominated in a non-EU currency.
• Intent. Recital 80 says the Pilot should encourage settlement in euro EMTs.

By our reading, this puts the Commission between the two camps: central bank money first, as the ESCB wants, with a defined route for stablecoins, which is closer to AFME’s view. We found no condition in the text we read that the token must be non-fungible with non-EU tokens. If the ESCB’s ask is adopted, it would go beyond what the Commission has proposed. Our DLT Pilot article covers where that package stands in Council.

Our Reading: Two Judgments

The multi-issuance fight matters more to an issuer than the headline contest. Central bank money versus stablecoin is a design question you can answer on your own terms. Multi-issuance decides which stablecoins you can lean on at all. If the ESCB view prevails, a coin issued in parallel by an EU and a non-EU entity could not serve as the settlement asset of a regulated infrastructure, whatever its liquidity. If AFME’s view prevails, such coins stay usable with added safeguards. We cannot tell which way it goes. The EBA’s wording, risks that are “significant to very significant”, suggests the status quo is under pressure.

Pontes weakens the argument that central bank money is unavailable. The Pilot’s fallback to stablecoins turns on “practical and available”. The ECB says Pontes launched on 21 September 2026, settling on the Eurosystem DLT platform with cash tokens or in T2, and its eligibility list includes DLT settlement system operators authorized under the Pilot. For a connected operator, the case for a stablecoin leg rests on something other than non-availability. Eligibility is limited and the service starts small, so the argument stays open for everyone else. Whether central bank settlement is available to a given operator is a matter for its competent authority, not for us.

Both points are our interpretation of public documents. Neither source states them.

What It Means for an Issuer Choosing a Cash Leg

• Stablecoin leg. Your claim is against the token’s issuer, which must be a credit institution or an e-money institution. Whether the same token is also issued outside the EU is the exposure the EBA and the ESCB care most about.
• Tokenized deposit leg. It is a claim on a bank and stays under banking law. The EBA says classification needs a case-by-case look because no harmonized definition exists. It also reports that 26% of respondent credit institutions expect to deploy tokenized deposits within three years, against 16% in 2024, with live cases still limited.
• Central bank money leg. Available through Pontes to eligible participants and operators. By our reading, a small issuer would normally reach it through one of them. Our Pontes article covers the route and its limits.

The Record View

In Stobox Intelligence an offering is a record, and the cash leg is one of its fields: the settlement asset (central bank money, commercial bank deposit, e-money token or other), the legal entity that owes it, the currency, the venue or route, the public document that says so, the date, and an evidence tier. A claim that a venue “settles in central bank money” is a dated, sourced statement, and so is a position such as the ESCB’s. When three authorities disagree, the record keeps all three with their dates and tiers; nothing is averaged into a single answer.

Design Note: Stobox Orbit

Stobox Orbit, a permissioned tokenization protocol, is in development and running on testnet (Base Sepolia). It makes no claim of regulatory compliance. Its documents do not mention central bank money, Pontes, tokenized deposits or MiCA e-money tokens, so this note is short.

• Currency is a field of the class. A decision recorded on 27 September 2026 (R42) says Orbit is designed to support share classes in USD, EUR and CHF from the start, EUR at least, with every money amount held in the class’s own currency.
• One offering, one currency. The decision log (D46) records that the investment ledger names each payment asset’s currency once, fixes each offering’s currency at its first purchase, and refuses a purchase paid in another currency. An asset with no named currency sells nothing. Conversion between currencies waits for a planned oracle FX channel.
• Unit equals obligation. In a closed-ended fund, one unit is designed to equal one unit of the class currency committed, so a transfer carries its unfunded obligation.
• Both legs on one ledger. The settlement contract is designed to move the security token and a payment token, an ERC-20 whose address is part of the instruction, in one transaction, both or neither. Orbit’s documents describe the payment asset by its currency, not by its legal nature. Whether it is a stablecoin, a deposit token or something else is a fact about that asset.

What to Do on Monday

1. Write the cash leg into the plan in one line. For each tokenized instrument, state: central bank money, tokenized deposit or e-money token, the currency, and what you do if the venue stops accepting it.
2. If a stablecoin is on the list, look up its issuer entity. Is it a credit institution or e-money institution in the EU? Is the same token also issued outside the EU? Read the white paper’s redemption terms.
3. If a tokenized deposit is on the list, ask the bank how its Member State classifies the token. The EBA says no harmonized definition exists yet, and it plans to report in Q4 2026.
4. Ask your venue or depository where it stands on Pontes. Is it connected, by when, and on which route? Our Pontes article lists the questions.
5. Keep yield out of the design. If subscription proceeds or reserves will sit in an EMT, do not count on interest on them. Article 50 covers issuers and service providers.

FAQ

Can a tokenized security settle in a stablecoin today? Under the DLT Pilot Regulation, a CSD operating a DLT settlement system may use e-money tokens, among other routes, only where central bank money is not practical and available (Article 5(8)). Outside the Pilot, it depends on the rules of the venue or depository.

Can a MiCA stablecoin pay interest to holders? No. Article 50 bars issuers and crypto-asset service providers from granting interest on e-money tokens, and treats benefits linked to the length of holding as interest. The ESCB, the EBA and AFME all asked to keep the ban.

What is multi-issuance and why does it matter for settlement? One token issued by an EU entity and a non-EU entity at once. The EBA rates the main risks as significant. The ESCB would let settlement systems use only EMTs that are not fungible with non-EU tokens.

Has the law changed since these responses? No. They are positions in a consultation, and the Commission’s December 2025 proposal is still in negotiation.

To see how a settlement question looks as a record, look at Stobox Intelligence; Stobox Orbit’s documentation will follow when it is public.

Related Reading in This Series

• Pontes: central bank money for tokenized securities
• MiCA or MiFID: which regime your token falls under
• The DLT Pilot Regulation and the 9 October ECOFIN
• Stablecoins explained
• Next in the series: the ESMA tokenization workshop on 28 October and the 2027 scenarios. For the national angle see our EU guide, the Germany guide, the tokenization overview and the glossary.

Sources

Accessed 1 October 2026.

1. ESCB, response to the European Commission’s targeted consultation on MiCAR, September 2026, sections 1.1, 1.2, 3.1, 3.2.3, 3.7 and 6.3: https://www.ecb.europa.eu/press/consultationresponse/pdf/ecb.conresp202609_micarreview.en.pdf
2. EBA, response to the EC targeted consultation on the review of MiCA, 24 September 2026, Q15, Q19, Q20, Q29, Q76 and Q77: https://www.eba.europa.eu/sites/default/files/2026-09/12cb4f01-0d51-46bf-a561-165ac486698f/EBA%20response%20to%20EC%20targeted%20consultation%20on%20MiCA%20review.pdf
3. EBA press release, The EBA identifies priorities for the review of MiCA, 24 September 2026: https://www.eba.europa.eu/publications-and-media/press-releases/eba-identifies-priorities-review-mica
4. AFME, consultation response on the MiCA review, 30 September 2026: https://www.afme.eu/media/pdppcjvm/20260930_afme-mica-consultation-response_final.pdf (listing: https://www.afme.eu/publications/consultation-responses/targeted-consultation-on-the-review-of-the-regulation-on-the-markets-in-crypto-assets-mica/)
5. Circle, Circle’s Response to the European Commission’s MiCA Review Consultation, 1 October 2026: https://www.circle.com/blog/circles-response-to-the-european-commissions-mica-review-consultation
6. European Commission, targeted consultation document on the review of MiCA, 20 May 2026, Question 30: https://finance.ec.europa.eu/document/download/62be7015-f066-4fac-b74e-71bacdbcc9f5_en?filename=2026-mica-review-targeted-consultation-document_en.pdf
7. Regulation (EU) 2023/1114 (MiCA), Articles 2(4), 36(5), 37(2), 48, 49, 50, 54 and 56(2), EUR-Lex: https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32023R1114
8. Regulation (EU) 2022/858 (DLT Pilot), Article 5(8) and recital 34, EUR-Lex: https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32022R0858
9. Commission proposal COM(2025) 943, 4 December 2025, proposed CSDR Articles 40 and 54c, DLT Pilot Article 5(8d) and recitals 59 and 80, EUR-Lex: https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52025PC0943
10. ECB press release, Eurosystem brings central bank money to tokenised finance, 21 September 2026: https://www.ecb.europa.eu/press/pr/date/2026/html/ecb.pr260921~e754847a7b.en.html
11. ECB, Pontes page (settlement routes and eligibility): https://www.ecb.europa.eu/paym/target/pontes/html/index.en.html
12. P. Cipollone, speech of 26 August 2026: https://www.ecb.europa.eu/press/key/date/2026/html/ecb.sp260826~3641116314.en.html

This article is general information based on public documents. It is not legal advice. Consult qualified counsel before making decisions about a specific issuance.