Officials from France, Germany, Spain, the Netherlands and Italy today called the European Commission to review standards and address any possible disruptions caused by stablecoins, such as Facebook’s Libra.
In a joint statement, finance ministers of the five European Union member states warned of many activities associated with stablecoins and highlighted other risks for which national regulators could be left unprepared.
Rather than dismissing the phenomenon, the European Commission is expected to present its regulatory proposals later this month, Reuters reported.
The yet-to-be revealed regulatory framework for stablecoins, a form of cryptocurrency that maintain their value by staking themselves to fiat reserves, should preserve the bloc’s monetary sovereignty and address risks to monetary policy, the report further states.
Although officials could eye potential use cases for the future but insist any stablecoin must adhere to regulatory demands as well as protecting consumers, the five countries said.
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Further, it should ensure that relevant authorities have the necessary powers, tools, and resources to supervise stablecoins, including their multi-functional activities. Another recommendation is for the authorities to have in place a governance framework, with a clear allocation of accountability. This includes obliging issuers to preserve a ratio of 1:1 with fiat currency, reserve assets to be dominated in euro or other European currencies. Furthermore, the watchdog will recommend fiat or other asset reserves to be deposited in an EU-approved institution.
Europe Pours Cold Water
To ensure that nothing could go wrong with the way stablecoins work, all entities involved in a similar scheme should be registered in the EU. Although they did not mention libra by name, the report talks about some concerns that have been raised since Facebook unveiled the project and will ultimately impact the association tasked with building up the coin.
“We’re waiting for the Commission to issue very strong and very clear rules to avoid the misuse of cryptocurrencies for terrorist activities or for money laundering. The central bank, I mean the ECB, is the only one to be allowed to issue a currency. And this point, it’s something that cannot be jeopardized or weakened by any kind of project including the so-called Libra project,” French Finance Minister Bruno Le Maire said.
European regulators have been united in pursuing a tough regulatory approach should Libra seek authorizations to operate in the 19-country bloc. They spoke about serious implications for financial stability if authorities lost control over the phenomenon and called for a common set of rules for crypto assets, but none of them has taken off so far.
The bloc’s authorities also poured cold water by floating the idea of launching a digital currency that would help it combat the direct threat of cryptocurrencies and also make projects like Facebook’s Libra appear redundant.