EU Commission Advocates Ban on Large-Scale Stablecoins Amid UST Saga
The European Commission is considering a significant crackdown on large-scale stablecoins, potentially banning them from widespread use as a substitute for fiat currency. This move comes in the wake of the TerraUSD (UST) saga, which highlighted the volatile nature of the stablecoin market. According to a document seen by CoinDesk, the European Commission is thinking of significant restrictions on the potential of stablecoins to be extensively utilised as a substitute for fiat currency. The European Commission is supporting the massive-scale ban on stablecoins in order to stop them from becoming widely used in place of fiat currency.
This tough approach could effectively see rivals to fiat currency outlawed in the bloc. Officials may be siding with the views of European Union finance ministers, who have proposed tough measures aimed at stopping the likes of Facebook's (now Meta's) Diem project. US Secretary of the Treasury Janet Yellen has called for far greater regulation of the stablecoin market amid last week’s unprecedented volatility of TerraUSD.
The proposed ban reflects concerns within the EU about the potential risks posed by large-scale stablecoins to financial stability and monetary sovereignty. While smaller stablecoins operating within defined limits may be permitted, those deemed capable of systemic impact are facing increased scrutiny.
The European Commission has rejected the ECB’s assessment as “overstated,” insisting that existing MiCA (Markets in Crypto-Assets) provisions provide adequate oversight of dollar-pegged stablecoins. Despite this confidence in MiCA, the Commission is still considering more severe measures to prevent the widespread adoption of stablecoins as an alternative to traditional currency.
The potential ban has sparked debate within the crypto industry and beyond. Supporters argue that it's necessary to protect consumers and the financial system, while critics worry that it could stifle innovation and limit access to digital financial services. The European Commission is thinking of significant restrictions on the potential of stablecoins to be extensively utilised as a substitute