The head of the European Banking Authority (EBA) said central banks should veto major stablecoins if they think they could upset monetary policy, fearing that the use of permissionless blockchains could prove to be financially unsound.
European Union Approaches Stablecoins With Caution
In the coming months, EBA President José Manuel Campa will lay out detailed rules for implementing the European Union's Crypto Asset Markets regulation (MiCA), a landmark framework that will require stablecoin issuers to obtain a license and have appropriate reserves.
"Central banks should have the power to veto the widespread use of so-called stablecoins if they affect public policy goals, including financial stability or monetary policy," Campa said at an event hosted by the think tank OMFIF today.
Campa's agency will also be responsible for direct supervision of major issuers under the MiCA.
MiCA allows central banks to intervene in new stablecoin issuance proposals, called asset-referenced tokens in MiCA.
It also requires that issuance be halted if the tokens become widely used with more than 1 million transactions per day.
Campa said he could see a future where stablecoins will become even more important as a means of payment, just as private payment systems currently complement central bank money.
But he stressed that they must adhere to "reasonable security measures", including complying with anti-money laundering laws.
MiCA will receive final signature from finance ministers next week, and its provisions will likely take effect around July 2024. Major players such as Circle and Unstoppable Finance have already announced their intention to issue stablecoins under MiCA.
*Not investment advice.