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European Central Bank wants veto power over crypto launches

The European Central Bank (ECB) seeks veto power over cryptocurrency launches in the euro zone, as well as having a greater spectrum of supervision. This would include, for example, the proposal of Facebook’s stablecoin, DIEM, formerly known as Libra.

According to the ECB, issuers of stablecoins should meet “rigorous liquidity requirements »In cash reserves, similar to money market funds.

On February 19, 2021, the European Central Bank published a proposal and modification of regulations on cryptocurrency markets. This proposal is based on a bill that had been presented on September 24, 2020, after receiving a series of requests from the Council of the European Union and the European Parliament.

The current document, called “Opinion of the European Central Bank”, states that the risk assessment in the conditions of stablecoins, which pose a eventual threat to the financial stability of the euro zone , should ” be under the exclusive competence of the ECB. ”

The text states that, specifically, major issuers of stablecoins should be required to carry out regular stress tests . These should take into account scenarios of financial stress (for example, interest rate shocks) and non-financial (for example, operational risk), serious but plausible.

Dedicates a section to specific observations on financial stability and prudential aspects of supervision . In it, it argues that in the proposed regulation the ECB must be notified in cases where an institution issues a white paper ( whitepaper when it has the intention to provide some service related to cryptocurrencies.

Reiterates the 12-page report, that the ECB should have the last word on the possibility of enabling the launch of a stablecoin in the euro zone. This should not jeopardize your control over inflation or the security of payments.

«When an asset reference agreement equates to a payment system or scheme, the potential threat assessment for the conduct of monetary policy and the proper functioning of payment systems, they must be the responsibility of the ECB “, says the institution.

Adds the text that the proposed European Union standards should be modified to say that its opinion on the matter is binding for the national authorities that evaluate the requests for the issuance of final resolutions.

Central banks concerned about the rise of bitcoin and other cryptocurrencies

Central banks around the world are concerned about the rise of cryptocurrencies , especially stablecoins, which derive their value from one or more official currencies. They fear that this could undermine control of payments, banking and, ultimately, the money supply.

A stablecoin is a cryptocurrency created with the purpose that its value remains stable relative to that of another asset. To maintain this little variability in their market price, they generally use a backup collateral deposit. The hedge relationship is made with other financial assets, fiat currencies, raw materials and even other crypto assets.

European Central Bank wants veto power over crypto launches
The ECB it places rigorous requirements on the issuers of stableicons. Source: wikipedia.org

As it will be recalled, on September 24, 2020, the European Commission proposed a complete regulatory framework for cryptocurrencies that would turn them into a financial instrument regulated.

The bill dubbed the “Market Regulation in Crypto Assets ” (MiCA) would provide this economic block clarity on what constitutes a cryptoasset, as well as definitions for different subcategories of tokens.

It would also grant them rules on cryptocurrency custody and capital requirements, while stipulating what the relationship will be between the token issuer and its holder, including the establishment of a procedure for investors to file complaints against projects.

The ECB indicates that Facebook would have to adhere to this regulation before launching its stablecoin proposal in the Zone Euro. The company planned to launch its cryptocurrency, initially called Libra, backed by a basket of official currencies, but scaled back the project last year after receiving a tip on regulatory matters.

The ECB also made a call. attention to companies that sell tokens linked to several currencies. These “should at least grant end users a direct claim on the issuer or on reserve assets and exchange rights.”

If this regulation is approved, it would be applicable in the 27 Member States, granting regulated cryptocurrency companies block-wide passport rights.

Also ECB President Christine Lagarde said that Bitcoin should be regulated globally or it will become a relief valve. In his own words, it is “a matter that has to be addressed at a global level, because if there is a leak, that leak will be used,” CriptoNoticias reported.

Lagarde considered on January 13, 2021 that “international cooperation and multilateral action are necessary” to promote consensual regulation that is firmly applied to bitcoin.

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Sandra Loyd
Sandra is the Reporter working for World Weekly News. She loves to learn about the latest news from all around the world and share it with our readers.

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