The European Central Bank (ECB) has expressed concerns regarding the potential financial instability resulting from the United States' strong support for the crypto sector. Specifically, the ECB warns that a rise in dollar-backed stablecoins might destabilize the European financial system. In a policy paper obtained by POLITICO, the ECB urged for revisions to the Markets in Crypto-Assets Regulation (MiCA), implemented only a few months prior. The agency fears that US reforms, particularly those promoted by President Donald Trump, could lead to a wave of dollar-denominated stablecoins entering European markets, prompting a capital flight into US assets. This could jeopardize the EU's financial sovereignty and heighten liquidity risks for banks. In contrast, the European Commission has downplayed these concerns, arguing the MiCA framework is sufficient to manage risks. The debate highlights a possible clash over regulations, especially as the stablecoin sector is currently valued at approximately $234 billion. The ECB's hesitation is noted by industry experts who criticize MiCA's restrictive rules that inhibit the competitiveness of European stablecoins on a global scale.

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