EU rethinks its approach to regulating stablecoins
Facebook’s Libra coin has sparked discussions about stablecoin regulation – could the EU issue its own coin?
The European Union is taking a close look at how it should regulate stablecoins like Facebook’s Libra. Yet different media sources disagree as to whether the organisation has plans to create its own digital currency.
Yesterday Reuters quoted an EU draft document that suggested that The European Central Bank was considering issuing its own stablecoin.
Yet an unnamed source has told Coindesk that, “there’s absolutely no commitment at this stage to put in place a new cryptocurrency,” adding: “The statement is to highlight the need for a proper regulatory framework for those stablecoins and as a consequence, different ideas should be explored. One of them is the possibility of having something that is managed by the ECB [European Central Bank] and other central banks.”
Digital currencies like Libra – also known as stablecoins – are backed by traditional money and other securities. Crypto coins like bitcoin are not.
Stablecoins were until recently not considered to be of huge interest by the EU as the largest, Tether, is so much smaller than bitcoin or ethereum. The potential global reach of Facebook’s Libra coin has forced the organisation to reconsider its take on stablecoins amid worries that they might create problems for the functioning of payment systems, taxation collection, cyber security and the battle against money laundering.
In recent months Facebool’s Libra project has stalled, losing a quarter of its original members including payments firms Visa and Mastercard. Much of the retrenchment was a result of negative comments about stablecoins from leaders of the G7 group of nations.
The EU statement on stablecoins is being readied for Friday November 8 and will be discussed and potentially ratified at the EU finance ministers’ meeting on December 5.
“At the very least, we need a robust regulatory framework to deal with virtual currencies,” Markus Ferber, a German conservative who leads on financial matters the largest EU Parliament grouping told Reuters.
“The (executive EU) Commission has been way too complacent on the issue so far. With the threat of Libra on the horizon, it is time for action now.”
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