While stable coins are not outright banned, nor are people restricted from using them for payments or investments, they will not be legally represented in the financial world of the European continent until all risks resolved. According to the Council of the European Union and the European Commission, they pose a risk to the continent’s monetary sovereignty.
According to a statement published by both the European Commission and the Council of the European Union, no international stablecoins such as Facebook’s Libra will be able to operate inside European territory until all monetary risks are resolved. While the new digital asset class could potentially provide a better method of fast and cheap payments, they are still too risky to be adopted with the ongoing regulatory framework.
Released on the 5th of December, the joint statement was also approved by the Economic and Financial Affairs Council (ECOFIN). At the moment, there is no clear sign of what implications the joint statement could have. Will the EU develop regulations that will legally prevent stablecoins in Europe, or will institutions only avoid adoption for the time being?
Stablecoins could undermine the monetary sovereignity of nations
Furthermore, the statement cited several claims as to why the digital asset could become a liability in the world of cross-border payments. Both institutions claimed that stablecoins would, if present worldwide, heavily destabilize the monetary sovereignty of nations. Their stance thus ties in with the previous statements on stablecoin projects of the FED and the G7 states.
“These arrangements pose multifaceted challenges and risks related, for example, to consumer protection, privacy, taxation, cyber security and operational resilience, money laundering, terrorism financing, market integrity, governance, and legal certainty. [..] These concerns are likely to be amplified, and new potential risks to monetary sovereignty, monetary policy, the safety and efficiency of payment systems, financial stability, and fair competition can arise,” reads the statement.
To prevent the threat of cryptocurrencies and specifically stablecoins, the global economy requires coordinated efforts from global jurisdictions, believe the European institutions. For now, if a company or entity were to issue stablecoins on the European continent, they are required to provide “full and adequate information urgently to allow for a proper assessment against the existing applicable rules.”
Finally, the joint statement concludes that: “No global ‘stablecoin’ arrangement should begin operation in the European Union until the legal, regulatory and oversight challenges and risks have been adequately identified and addressed.”