EU Eyes Unified Stablecoin Rules Despite ECB Concerns

Brussels Pushes Ahead with Stablecoin Regulations

Despite concerns raised by the European Central Bank (ECB), the European Commission is reportedly preparing to unveil new regulations for the stablecoin market. The Financial Times reports that these rules aim to create a more unified approach to stablecoins within the EU.

Key Proposed Changes

The Commission's guidance suggests treating stablecoins issued outside the EU as interchangeable with their EU-authorized counterparts. This move could potentially streamline the use of stablecoins across different jurisdictions. The announcement is expected in the coming days.

ECB's Worries

The ECB has expressed reservations, warning that the proposed standards could destabilize the region's banks, particularly during periods of market volatility. ECB President Christine Lagarde has repeatedly emphasized the risks posed by privately issued stablecoins, citing potential deposit outflows from traditional banks and concerns about maintaining a fixed value.

Digital Euro as a Countermeasure?

Brussels initially proposed legislation for a digital euro in June 2023, aiming to provide a central bank digital currency (CBDC) alternative. The ECB views a digital euro as a way to counter the influence of stablecoins, especially those pegged to the US dollar.

Commission's Rebuttal

A European Commission spokesperson dismissed the likelihood of a significant "run" on well-governed, fully collateralized stablecoins. They also suggested that even in such a scenario, most redemptions would likely occur in the US, where the majority of reserves are held.

Key Takeaways

• The EU is pushing forward with stablecoin regulation despite ECB warnings.
• The new rules aim for greater uniformity between EU and non-EU stablecoins.
• The ECB is concerned about potential risks to financial stability.
• A digital euro is seen as a potential competitor to stablecoins.