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(Kitco News) –
The European Banking Authority (EBA) wants central banks to veto big stablecoins if they believe the cryptocurrencies could threaten their monetary policy.
“Central banks should have the power to veto the widespread introduction of so-called stablecoins,” said EBA Chair José Manuel Campa on Thursday.
Campa was speaking in London at the Central banks and Digital Currencies Symposium, an event hosted by the Official Monetary and Financial Institutions Forum (OMFIF), an independent think tank for central banking, economic policy and public investment.
Campa’s agency will be directly responsible for supervising major issuers under the European Union’s Markets in Crypto Assets regulation (MiCA). The European Parliament voted in favor of MiCA on April 20, and the legislation establishes a new regime for crypto-asset service providers across the EU’s member states.
In addition to requiring stablecoin issuers to obtain a license and hold suitable reserves, MiCA also lets central banks intervene on proposals to issue new stablecoins, referred to in MiCA as ‘asset-referenced tokens.’ It will also require issuance of the stablecoins to cease if the tokens reach over 1 million transactions per day.
Campa said he could imagine a future where stablecoins will “become even more relevant” as a means of payment, in the same way that private payment systems complement central bank money today. He added, however, that these stablecoins would need to comply with “sensible guardrails,” including respecting anti-money laundering laws.
Stablecoin issuers who wish to operate in the European Union “have to ask for permission,” he said. “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.”
The U.S. Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) have all expressed concern that stablecoins on decentralized and permissionless blockchains could entail risks to policy goals and the broader economy.
Campa added that more ambitious projects would receive more scrutiny from the EBA.
“All issuers will be subject to a robust authorization and also supervisory framework going forward,” Campa said. This includes prudential governance, redemption arrangements, and business conduct, and the largest issuers can expect “enhanced stress testing” of their reserves under the new regulatory regime.
MiCA is expected to get final approval from European finance ministers next week, and the new regulatory regime will likely be implemented in Q3 2024.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
