European Commission Plans Stablecoin Rules Despite ECB Warnings

The European Commission is set to introduce new rules that will treat stablecoins issued outside the EU as interchangeable with those issued within the bloc, aiming to close a legal loophole and provide regulatory clarity. This regulatory move seeks to integrate stablecoins into the traditional financial system, promoting innovation and financial inclusion, despite warnings from the European Central Bank (ECB) about potential risks to monetary policy and financial stability. ECB President Christine Lagarde has highlighted concerns that fungibility between non-EU and EU-issued stablecoins could lead to bank runs and threaten EU banks by straining their reserves. The Commission's approach aligns with efforts to foster a unified legal framework under the broader MiCA regulation while addressing the rapid growth of the stablecoin market, which is projected to grow significantly. Meanwhile, the EU is also exploring the launch of a digital euro to enhance financial sovereignty as stablecoins, often pegged to the U.S. dollar, gain prominence globally. These developments come amid global regulatory moves, including U.S. legislation setting standards for stablecoin backing and transparency.