Europe’s crypto rules do enough to address the risks around stablecoins, the European Commission said on Friday, signalling it does not see the need for major change after the European Central Bank called for more safeguards.
Stablecoins – cryptocurrencies pegged to real-world currencies – are among the fastest-growing parts of the digital assets industry, with the U.S. this year passing legislation to promote their usage.
Europe has launched a landmark set of crypto-specific rules, but lawmakers in Brussels are facing pressure from the ECB to block the so-called “multi-issuance” stablecoin model.
ECB CALLS FOR SAFEGUARDS
At the heart of the dispute is the question of whether a multinational stablecoin company can treat the tokens it issues within the EU as interchangeable with those held outside the EU.
In a letter sent to European Commissioner Maria Luis Albuquerque on Tuesday, six crypto industry associations, whose members include major stablecoin issuer Circle, called on the EU to publish guidance “confirming multi-issuance in principle” and clarify how it works under the EU’s crypto rules, called MiCA.
“We believe MiCA provides a robust and proportionate framework for addressing risks stemming from stablecoins,” a Commission spokesperson told Reuters in emailed comments, acknowledging receipt of the letter.
“The Commission is working towards providing such clarification as soon as possible.”
The European Systemic Risk Board, headed by ECB President Christine Lagarde, has said that the multi-issuance structure would bring built-in risks for financial stability and called for urgent safeguards.
The ECB is concerned that people holding tokens created by a stablecoin’s non-EU entity could choose to redeem it with the EU entity, potentially creating a run on reserves held within the EU.
But stablecoin issuers say that they can make sure they always have enough reserves to meet redemption requests, wherever they take place.
JP Morgan analysts said this week that 99 per cent of stablecoin supply is pegged to the dollar, and that the sector’s growth would boost demand for the greenback.
