Amidst all the hype surrounding cryptocurrencies and banks developing central bank digital currencies (CBDCs), the finance ministers of the five European Union member states, namely Germany, France, Italy, Spain, and the Netherlands have urged the European Commission to tighten regulations around stablecoins.
According to a Reuters report, the ministers have stated in a joint statement on September 11, that asset-backed cryptocurrencies like stablecoins shouldn’t be allowed to operate in the 27-member bloc until proper regulations are in place, to protect consumers and preserve state sovereignty in monetary policy.
Stablecoins came under the crosshairs of European regulators last year when Facebook announced the launch of its global stablecoin Libra and it was immediately flogged by European regulators.
Authorities were concerned that a stablecoin like that could give rise to various problems like facilitating money laundering and erode privacy, besides destabilizing the monetary policy.
In the joint statement, the five nations said that the EU’s regulatory framework for stablecoins must be able to preserve the bloc’s monetary sovereignty, and address various associated risks to monetary policy, while also protecting consumers.
German Finance Minister Olaf Scholz said in a statement:
“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.”
Scholz stressed on the fact that strict measures must be taken, and this includes banning private entities that do not meet regulatory requirements.
Per the report, all the five nations want a stablecoin that is pegged 1:1 with fiat, with reserve assets denominated in the euro or the respective currencies of the member states, and deposited in EU-approved institutions only.
Furthermore, the ministers added that any entity involved with the development and operation of a stablecoin must be registered in the EU. A move that is also targeted at the Geneva-based Libra Association, which plans on issuing and governing Libra.
“We’re waiting for the Commission to issue very strong and very clear rules to avoid the misuse of cryptocurrencies for terrorist activities or for money laundering,” French Finance Minister Bruno Le Maire said.
“The central bank, I mean the ECB, is the only one to be allowed to issue a currency. And this point, it’s something that cannot be jeopardized or weakened by any kind of project including the so-called Libra project,” he added.
The European Commission is expected to present its regulatory proposals in the coming weeks.