Brussels is set to ignore ECB warnings over stablecoin rules, FT report

(Reuters) – The European Commission is planning to announce new rules for the rapidly growing stubcoin market in the coming days despite warnings that the proposed standards could destabilize regional banks during the period of market volatility.

The European Union executive arm plans to issue formal guidance suggesting that stubcoins issued outside the block will be treated as exchangeable for versions of the brand, which are only permitted in the EU market, the newspaper said it cited people who were explained about its contents.

The guidance announcement is scheduled for the coming days, the FT reported, citing one unnamed source.

Reuters could not immediately confirm the report.

Brussels proposed laws in June 2023 regarding the creation of the digital euro, the so-called central bank digital currency, but much has not happened since.

The ECB sees the digital euro as a response to US President Donald Trump’s push to promote a kind of cryptocurrency that is normally pinned in the US dollar.

ECB President Christine Lagarde updated her plea in the European Parliament on Monday, describing the digital euro as the key to European financial autonomy.

She aimed for a competitive, competing, personally issued stubcoin, saying it brought “the risk of monetary policy and financial stability” as she could seduce deposits from the bank and couldn’t maintain fixed value at all times.

A European Commission spokesman told the FT “it’s very unlikely to run on something fully signed and fully secured, ridiculous.”

Even if that happens, the spokesman quotes it as saying, “foreign holders will (for example) exchange tokens in the US where most of the tokens are circulated and the majority of the reserves are held.”

The committee did not immediately respond to requests for comment.

(Reporting by Yazhini MV of Bengaluru and Mrinmay Dey, edited by Kevin Liffey)