The European Central Bank (ECB) has expressed concerns over the potential destabilizing effects of the United States' robust support for the crypto sector, particularly regarding a wave of dollar-backed stablecoins that could infiltrate European markets. In a policy paper obtained by POLITICO, the ECB indicated a need to revise the recently implemented Markets in Crypto-Assets Regulation (MiCA) framework to mitigate these risks. The ECB worries that US reforms could prompt significant capital flight from Europe to US markets, threatening the EU's financial sovereignty and causing liquidity challenges for its banks. In contrast, the European Commission has downplayed the ECB's warnings, suggesting that the current MiCA framework is sufficient to handle stablecoin threats, despite rising US crypto initiatives. Analysts have echoed ECB's concerns about potential redemption pressures on European stablecoin issuers that lack protective limits, which could lead to a financial 'run'. Commentators note that EU regulations might impede the competitiveness of its stablecoins on a global scale, influenced by bank lobbying.

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