According to the Reuters report, Germany, France, Italy, Spain, and the Netherlands called on the European Commission to draw up strict regulation for asset-backed cryptocurrencies such as stablecoins to protect consumers and preserve state sovereignty in monetary policy. The five European Union member states’ finance ministers said in a joint statement that stablecoins should not be allowed to operate in the 27-member bloc until legal, regulatory, and oversight challenges had been addressed.
European Commission is expected to present its regulatory proposals this month.
“We all agree that it’s our task to keep financial market stable and to ensure that what is a task for states remains a task for states,” German Finance Minister Olaf Scholz told reporters during a joint statement with his counterparts. Stablecoins are a type of cryptocurrency backed by traditional assets. Stablecoin came into policymakers’ agendas last year when Facebook revealed plans for its Libra coin. Central banks and financial regulators across countries expressed concerns about how Libra could destabilize monetary policy, facilitate money laundering, and erode privacy. Since then, Libra Association has reshaped the project and changed its white paper to please regulators. The European Commission is expected to present its regulatory proposals later this month.
European countries want stablecoins to be pledged at a ratio of 1:1 with fiat currency.
The five countries want all stablecoins to be pledged at a ratio of 1:1 with fiat currency, with reserve assets denominated in the euro or other currencies of EU member states and deposited in an EU-approved institution. All entities operating as part of a stablecoin scheme should be registered in the EU, they said. Such regulations would likely impact the Geneva-based Libra Association, which plans to issue and govern its stablecoin Libra. The French Finance Minister Bruno Le Maire said that they are waiting for the Commission to issue very strong and very clear rules to avoid the misuse of digital currencies for terrorist activities or money laundering.