The official also claimed the ECB has recently been hyping the stablecoin menace to bolster political support for its controversial digital euro project, an effort to build a pan-European payment system that, it says, would shield Europe’s financial infrastructure from crypto-assets.
Stablecoins denominated in dollars, which are backed primarily by U.S. treasuries, account for 99 percent of the $240 billion market, according to Frankfurt. The central bank fears that allowing dollar-backed stablecoin issuers to offer their product in both the U.S. and the EU could also favor “existing non-EU stablecoin issuers who have already established an oligopolistic market position,” and could trigger a flood of EU investment in U.S. debt, undermining the bloc’s plans to strengthen its own financial market.
In the worst-case scenario, the ECB argued, EU issuers could be forced to redeem foreign-held tokens as well as European ones, risking a “run” on their reserves if either are found to be insolvent and potentially having a knock-on effect on exposed banks.
In its own paper, also seen by POLITICO, the Commission forcefully defended the effectiveness of the rules, even taking into account the planned U.S. reforms, hinting that the central bank was being melodramatic. “The risks arising from such global stablecoins seem to be overstated and are manageable under the existing legal framework,” the Commission said in the document.
The EU executive argued that it was still “too early” to judge what effect the U.S. crypto resurgence would have on EU markets. In any case, it said, the MiCA rules already require crypto asset providers to adhere to stricter criteria to operate in the EU market — and have already forced some major players to delist their stablecoins, including the well-known Tether, from exchanges. The Commission acknowledged, however, that those rules do require enforcement.
Still, the EU executive also noted that only a single global stablecoin has been authorized under the new rules so far. The bill allows the central bank itself to block such issuers from operating if “they pose a threat to smooth operation of payment systems, monetary policy transmission or monetary sovereignty,” it said.
Rules for banking already offer protection against potential contagion, while redemption rights can be limited to EU holders only, it said.