Central banks should veto large stablecoins if they have fears they could upend monetary policy, the chair of the European Banking Authority (EBA) has said, citing fears that the use of permissionless blockchains could prove financially unsound.
EBA Chairperson José Manuel Campa will in the coming months be setting out the detailed rules to implement the European Union’s Markets in Crypto Assets regulation (MiCA), a landmark framework that will require stablecoin issuers to gain a license and hold suitable reserves.
“Central banks should have the power to veto the widespread introduction of so-called stablecoins” if they affect public policy goals, including financial stability or monetary policy, Campa said at an event hosted by think tank OMFIF on Thursday. Campa's agency will also be responsible for directly supervising major issuers under MiCA.
MiCA lets central banks intervene on proposals to issue new stablecoins, referred to in MiCA as asset-referenced tokens. It also requires issuance to cease if the tokens become widely used with over 1 million transactions per day. Different rules apply for stablecoins tied to the value of a single fiat currency, known as e-money tokens.
Campa said he could see a future where stablecoins will “become even more relevant” as a means of payment, just as private payment systems now complement central bank money – but stressed they would have to comply with “sensible guardrails,” including respecting anti-money laundering laws.
In answer to a further question from former U.S. Commodity Futures Trading Commission Chairman Timothy Massad, Campa also appeared to share concerns voiced by the U.S. central bank, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency that stablecoins on decentralized, permissionless blockchains could prove unsafe or unsound.
EU stablecoin issuers “have to ask for permission… you have to put forward your project and that project has to be assessed, particularly for the concerns that have been put forward by the U.S. regulators,” Campa said, adding that scrutiny would be greater on more ambitious projects.
“All issuers will be subject to a robust authorization and also supervisory framework going forward,” Campa said, including of prudential governance, conduct of business and redemption arrangements, with the largest issuers facing “enhanced stress testing” of their reserves.
MiCA is set to receive final sign-off from finance ministers next week, and its provisions will likely take effect around July 2024. Major players such as Circle and Unstoppable Finance have already announced their intention to issue stablecoins under MiCA.
All writers’ opinions are their own and do not constitute financial advice in any way whatsoever. Nothing published by CoinDesk constitutes an investment recommendation, nor should any data or Content published by CoinDesk be relied upon for any investment activities. CoinDesk strongly recommends that you perform your own independent research and/or speak with a qualified investment professional before making any financial decisions.
Recommended Content
Editors’ Picks
Lido DAO announces new phase on Ethereum with Simple DVT module
Lido DAO voted on the deployment of the Simple DVT module nearly six months ago, it is ready for mainnet as of April 17. Simple DVT helps to make Lido’s technology accessible to more users. LDO price is down nearly 3% in the past day.
New altcoins crash and burn, but this altcoin shows strength Premium
Binance Coin price shows a bullish pennant continuation pattern. BNB could range between the $600 to $526 levels until the skies clear out for Bitcoin. The altcoin could see a massive gain with the upcoming BEP-336 upgrade.
Cronos price fails to recover despite network upgrade
Cronos (CRO) is an Ethereum Virtual Machine (EVM) compatible chain in the Cosmos ecosystem. A mainnet upgrade was completed early on Wednesday and the asset’s price declined nearly 2% in the past 24 hours.
XRP tests $0.50 resistance after Ripple CLO says pretrial conference with SEC did not take place
XRP is stuck below $0.50 resistance after failing to close above this level since Monday. Ripple CLO Stuart Alderoty said late Tuesday there was no pretrial conference since the SEC dropped charges against executives.
Bitcoin: BTC’s rangebound movement leaves traders confused
Bitcoin (BTC) price has been hovering around the $70,000 psychological level for a few weeks, resulting in a rangebound movement. This development could lead to a massive liquidation on either side before a directional move is established.