The chair of the European Banking Authority (EBA), José Manuel Campa, has expressed his concern over the potential risks of large stablecoins and has called for central banks to have veto powers over their widespread adoption. This comes as the EBA prepares to set out detailed rules for implementing the European Union’s Markets in Crypto Assets (MiCA) regulation – a significant framework that will require stablecoin issuers to hold an appropriate license and maintain suitable reserves.
According to Campa, central banks should have the authority to prevent the spread of stablecoins if they pose a threat to public policy goals, such as financial stability or monetary policy. This sentiment highlights the growing recognition that stablecoins could have a significant impact on the global financial system. In a time where private payment systems are complementing central bank currencies, Campa envisions stablecoins becoming more relevant as a means of payment. However, he also emphasizes the importance of “sensible guardrails” to ensure that these digital assets comply with anti-money laundering regulations and other legal requirements.
The MiCA regulation will enable central banks to intervene in the issuance of new stablecoins, also known as asset-referenced tokens. Furthermore, it mandates the cessation of issuance if the tokens undergo over one million transactions per day. e-Money tokens – stablecoins tied to the value of a single fiat currency – will be subject to different rules.
Campa’s concerns about the use of decentralized, permissionless blockchains for stablecoins echo those of the U.S. central bank, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency. Such platforms could potentially be unsafe or unsound, hence EU stablecoin issuers will need to seek permission and submit their projects for assessment.
All stablecoin issuers will be subject to a rigorous authorization and supervision process, whereby their prudential governance, the conduct of business, and redemption arrangements will be examined. The largest issuers can expect enhanced stress testing on their reserves. MiCA is scheduled to receive final approval from finance ministers next week, with its provisions likely taking effect around July 2024. Major players such as Circle and Unstoppable Finance have already announced plans to issue stablecoins under MiCA, showcasing the potential for this emerging digital asset class to make a significant impact on the future of finance.
Source: Coindesk
