EU ministers demand new rules for stablecoins because they need to be heavily regulated within the region and they specifically called out Facebook’s Libra. In today’s Libra news today, we see what the policymakers from France, Spain, Germany, Italy, and the Netherlands have in mind.
The EU ministers from five countries called on the European Commission to set new strict rules for stablecoins. Regulation is needed to keep the financial market stability and the proposed rules can affect the rollout of Facebook’s Libra. The finance ministers from five countries called on the European Commission to create new rules for stablecoins. In their joint statement, the ministers said that stablecoins should not operate in the European Union until the regulation is clear according to a report. That could stifle Libra’s project which is based in the non-EU member state Switzerland from lifting it off the ground.
The finance ministers also want the stablecoins operating within the EU to be pegged 1:1 to the fiat currency from the EU. The assets backed to the stablecoins should be deposited within the financial institution approved by the European Union. The Finance minister warned that these rules should be put in place “to keep financial markets stable” and protect the EU financial sovereignty. French Finance Minister Bruno LeMaire also added that they are waiting for strong and clear rules in order to avoid the misuse of cryptocurrencies for illegal activities such as money laundering.
The regulations will apply to stablecoins theoretically but Le Maire made clear that he is concerned about one yet-to-be issued coin: Libra. Le Maire added:
“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.”
Announced by Facebook in 2019, the blockchain-based Libra coin, that is supposed to be used for online payments which will eventually be issued and governed by the Libra Association in Geneva, Switzerland outside of the EU. Stablecoins are closely watched by governments since the Facebook announcement, the project faced regulatory and political issues including the markets in the United States. A number of financial transaction firms such as Visa and Mastercard quit the project after it was cautioned by American lawmakers.
The Financial stability board issued 10 stablecoins recommendations and warned that these assets could “undermine the financial stability” while the International Organization of Securities Commission said that the stablecoins pose regulatory risks.
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