The European Central Bank (ECB) has raised alarm over the potential fallout from the United Statesโ aggressive support for the crypto industry, warning that a surge in dollar-backed stablecoins could destabilize Europeโs financial system.
According to a policy paper seen by POLITICO, the ECB has asked for a revision of the Markets in Crypto-Assets Regulation (MiCA) regulatory framework for cryptocurrencies just months after it came into effect.
At the center of the dispute is the concern that US reforms, backed by President Donald Trump, could flood European markets with dollar-denominated stablecoins.
The ECB fears this could trigger a flight of European capital into US assets, undermining EU financial sovereignty and exposing banks to liquidity risks.
ECB and European Commission Clash Over MiCA Rules
While the ECB calls for tighter controls, the European Commission has dismissed these warnings as exaggerated, per the report.
The report, citing two diplomats and one EU official, said that the existing MiCA framework is robust enough to manage stablecoin risks despite upcoming US policies like the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) and the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Acts aimed at expanding Americaโs crypto footprint.
โThe Commission was quite clear that they had different views on this topic,โ and โnot very many (countries) supported the idea that we should now jump the gun and start making quick changes in (the rules) based on this alone,โ one of the diplomats reportedly told POLITICO.
The stablecoin sector now commands a valuation of $234.151 billion, according to data from CoinMarketCap.
The ECB warns that European issuers could face redemption pressures from EU and foreign holders without stricter limits, potentially sparking a financial โrunโ and harming exposed institutions.
โThe worry is warranted,โ Mikko Ohtamaa, co-founder and CEO at Trading Strategy, said in a post on X. โHowever, the EU had the first mover advantage with the regulation and they screwed it up.โ
Ohtamaa said no EU stablecoin is globally competitive due to MiCAโs restrictive rules, which are influenced by bank and legacy finance lobbying.
Related:ย US regulator,s FDIC and CFTC, ease crypto restrictions for banks, derivatives
Tether Remains a Major Critic of MiCA
โTether, the issuer of the worldโs largest stablecoin, USDT, has long been a major critic of the EUโs MiCA regulation.
Last year, CEO Paolo Ardoino argued that MiCAโs requirements, particularly the mandate for stablecoin issuers to hold at least 60% of reserves in EU bank accounts, could introduce systemic risks to both stablecoins and the broader banking system.
Due to noncompliance with MiCA, Tetherโs USDT has faced delistings from major European exchanges, including Coinbase, Crypto.com, and Kraken.
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