EBA worries that decentralized stablecoins could threaten the EU's financial stability.
The European Banking Authority (EBA) Chairperson suggests that central banks may need the authority to veto large stablecoins if they pose a threat to monetary policy or financial stability.
The statement comes as concerns rise about the potential instability of permissionless blockchains.
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The EBA Chairperson José Manuel Campa will soon outline detailed rules for implementing the European Union's Markets in Crypto Assets (MiCA) regulation. The groundbreaking framework mandates stablecoin issuers to obtain a license and maintain appropriate reserves.
MiCA enables central banks to intervene in proposals for new stablecoin issuance, referred to as asset-referenced tokens within the regulation. It also specifies that issuances must cease if the stablecoin exceeds one million daily transactions.
It is worth noting that separate rules apply to stablecoins pegged to a single fiat currency, called e-money tokens.
Campa envisions a future where stablecoins become increasingly relevant as payment methods, complementing central bank money in a similar fashion to private payment systems. However, he stresses the importance of adhering to "sensible guardrails," including compliance with anti-money laundering regulations.
Addressing concerns raised by former US Commodity Futures Trading Commission Chairman Timothy Massad, Campa seemed to echo worries expressed by US regulators such as the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency.
All regulators fear that stablecoins operating on decentralized, permissionless blockchains could be unsafe or financially unsound.
Campa explained that EU stablecoin issuers must request permission and submit their projects for assessment, particularly in light of concerns voiced by US regulators.
All issuers will be subject to a robust authorization and also supervisory framework going forward.
MiCA is slated for final approval from finance ministers next week, with provisions likely to take effect around July 2024. Major players, including Circle and Unstoppable Finance, have already announced plans to issue stablecoins under the MiCA regulation.
After months of anticipation, on April 20th, the EU Parliament passed the Markets in Crypto-Assets Act.
