The European Central Bank (ECB) raised an alarm over potential fallout from aggressive US help for the crypto trade, warning {that a} surge in dollar-backed stablecoins may destabilize Europe’s financial system.
According to a coverage paper seen by Politico, the ECB has requested for a revision of the Markets in Crypto-Assets Regulation (MiCA) regulatory framework for cryptocurrencies simply months after it got here into impact.
The concern is that US reforms backed by President Donald Trump may flood European markets with dollar-denominated stablecoins.
The ECB fears this might set off a flight of European capital into US belongings, undermining EU financial sovereignty and exposing banks to liquidity dangers.
ECB and European Commission Clash Over MiCA Rules
While the ECB requires tighter controls, the European Commission dismissed the warnings as exaggerated, per the report.
The report, citing two diplomats and one EU official, stated that the prevailing MiCA framework is strong sufficient to handle stablecoin dangers regardless of potential US insurance policies like the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) and the Guiding and Establishing National Innovation for US Stablecoins (GENIUS), two payments geared toward increasing America’s crypto footprint.
“The Commission was fairly clear that they’d completely different views on this matter,” and “not very many (international locations) supported the concept that we must always now leap the gun and begin making fast adjustments in (the principles) primarily based on this alone,” one of the diplomats reportedly advised Politico.
The stablecoin sector now instructions a valuation of $234 billion, in keeping with data from CoinMarketCap.
The ECB warned that European issuers may face redemption pressures from EU and international holders with out stricter limits, doubtlessly sparking a financial “run” and harming uncovered establishments.
“The fear is warranted,” Mikko Ohtamaa, co-founder and CEO at Trading Strategy, stated in a put up on X. “However, the EU had the primary mover benefit with the regulation and so they screwed it up.”
Ohtamaa stated no EU stablecoin is globally aggressive as a consequence of MiCA’s restrictive guidelines, that are influenced by financial institution and legacy finance lobbying.
Related: US regulator,s FDIC and CFTC, ease crypto restrictions for banks, derivatives
Tether stays a significant critic of MiCA
Tether, the issuer of the world’s largest stablecoin, USDt (USDT), has lengthy been a critic of the EU’s MiCA regulation.
Last yr, Tether CEO Paolo Ardoino argued that MiCA’s necessities, notably the mandate for stablecoin issuers to carry not less than 60% of reserves in EU financial institution accounts, could introduce systemic risks to both stablecoins and the broader banking system.
Due to noncompliance with MiCA, USDT has confronted delistings from main European exchanges, together with Coinbase, Crypto.com and Kraken.
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