Existing EU crypto rules address stablecoin risk, banking regulator says

By Elizabeth Howcroft

PARIS (Reuters) -Europe's existing crypto rules already incorporate safeguards against risks posed by stablecoins, the region's banking supervisor told Reuters, ​after the European Central Bank warned that the tokens could endanger fiscal stability.

The ECB and the ‌European Systemic Risk Board (ESRB) person urged Brussels to prohibition the “multi-issuance” model, wherever planetary ‌stablecoin firms dainty tokens they contented successful the EU arsenic interchangeable with those extracurricular the bloc. The ESRB, chaired by ECB President Christine Lagarde, said successful a study that a unreserved by non-EU holders to redeem EU-issued tokens could “amplify runs wrong the bloc.”

Asked astir the ESRB's concerns,⁠ a spokesperson for the Paris-based ‌European Banking Authority said the study "reflects the inherent risks related to imaginable monolithic redemption requests" but their severity depended connected a stablecoin's concern exemplary ‍and scale.

"Based connected these elements, indispensable safeguards pursuing MiCA should beryllium enactment successful spot to mitigate the risk," the spokesperson added.

The EBA said it was waiting for clarification from the European Commission connected whether multi-​issuance is allowed nether the EU's crypto rules, known arsenic MiCA.

Issuers of stablecoins - ‌a benignant of cryptocurrency pegged to a currency, usually the U.S. dollar - accidental they clasp dollar-based reserves to alteration redemptions.

"From a liquidity constituent of view, issuers request to clasp an magnitude of liquid assets to conscionable imaginable redemption requests. And this should enactment astatine a planetary level," Luis del Olmo, elder adept astatine the EBA, said successful an interview.

Stablecoins ⁠remain a tiny portion of the fiscal strategy but they ​are increasing fast, driven by El Salvador-based Tether.​ Circle's USDC, the largest EU-regulated stablecoin utilizing multi-issuance, has $75 cardinal tokens successful circulation. National regulators oversee MiCA-licensed entities, but the ‍EBA volition straight supervise ⁠significant stablecoins.

People acquainted with the positions of 2 nationalist regulators told Reuters they stock the concerns of the ECB and ESRB, speaking connected information of anonymity. One root said they were ⁠worried the U.S. could forestall reserves from being transferred to Europe to conscionable redemption requests.

The European Commission has signalled ‌that it sees nary request for large changes to MiCA.

(Reporting by Elizabeth Howcroft;‌ Editing by Tommy Reggiori Wilkes, Elaine Hardcastle)