The European Central Bank (ECB) has sent a formal opinion on crypto regulations to the European Commission, requesting it is given veto rights on stablecoins, Reuters reported on 23 February.
According to the publication, the ECB has demanded that EU lawmakers give it the final say when it comes to proposed stablecoin launches in the Euro Zone. The central bank has further said it should have the right to assess the potential threat a digital asset, like a stablecoin, could have on the financial stability of the Euro Zone. The central bank’s opinion, dated 19 February, says:
“Where an asset-reference arrangement is tantamount to a payment system or scheme, the assessment of the potential threat to the conduct of monetary policy, and to the smooth operation of payment systems, should fall within the exclusive competence of the ECB.”
The ECB has further stated that all stablecoin issuers in the zone have to meet the same “rigorous liquidity requirements” on cash reserves as other financial institutions and banks, ensuring the redemption rights of their customers. The central bank has also requested that any ruling made by the EU should be binding on all national institutions “assessing applications to issue stablecoins”.
All of this could spell trouble for potential stablecoin issuers like Diem — previously known as Libra — which has already initiated the payment system licensing process with the Swiss Financial Markets Supervisory Authority (FINMA). Even before the ECB requested veto rights on stablecoins, Diem already had troubles with the Group of Seven (G7) — some members of which are from the EU — which stated last October that “no global stablecoin project should begin operation until it adequately addresses relevant legal, regulatory, and oversight requirements”.