The European Central Bank has finally sent its formal opinion on crypto regulation to the European Commission.
According to Reuters, the ECB has asked EU lawmakers for veto powers over private stablecoin projects such as Diem, backed by Facebook. An excerpt from the ECB opinion document reads as follows:
“Where an asset benchmark arrangement equates to a system or a payment system, the assessment of the potential threat to the conduct of monetary policy and the proper functioning of payment systems should be the sole responsibility of the BCE. “
As part of the demand for a veto power over stablecoins, the ECB urged the EU to ensure that its decision is binding on all national authorities in the euro area. According to the ECB, issuers of stablecoins must adhere to the same stringent liquidity requirements as banks and other traditional financial institutions.
For the ECB, certain “stringent liquidity requirements” are necessary to ensure the protection of redemption rights and direct claims of clients on reserve assets held by stablecoin issuers.
Indeed, the ECB had already expressed its concerns about a possible “bank run” on stablecoins in September 2020.
If EU lawmakers grant veto powers to the ECB, private issuers of stablecoins like Diem could face further regulatory hurdles, even if the project gets approval from Swiss regulators.
ECB President Christine Lagarde is a notorious critic of stablecoins and cryptocurrencies in general. As previously reported by TBEN, Lagarde recently ruled out the possibility that central banks will ever hold Bitcoin (BTC) amid the wave of public companies adding the largest crypto by market cap to their balance sheets.
On the digital euro, the ECB has revealed that it is working on a launch within the next four years. However, any digital euro developed by the ECB will be exempt from existing EU digital currency laws.