The European Commission is set to clarify that the European Union’s crypto rules allow stablecoins issued by a company with an EU licence to be treated as interchangeable with those issued by a company’s non-EU entities, a source close to the matter said on Wednesday.
The Commission will provide the clarification in the near future, the person said, without giving further details.
Stablecoins are a type of crypto asset designed to maintain a stable value by being pegged to a traditional currency, like the U.S. dollar.
The guidance is the latest in a series of attempts by regulators to grapple with the risks around stablecoins.
ECB President Christine Lagarde on Monday told European policymakers stablecoins posed risks for monetary policy and financial stability, urging European lawmakers to introduce legislation backing the launch of a digital euro.
The EU in 2023 adopted an extensive set of rules for crypto assets, known as MiCA, under which issuers of stablecoins must receive supervisory clearance to create their tokens in the EU – referred to as e-money tokens (EMTs).
EMT-issuers must hold most of the reserves which back those tokens in an EU-based bank, to ensure that they can meet redemption requests from customers who wish to swap the crypto back into fiat currency.
In April 2024, France’s banking supervisor posed a query which the Commission is now set to answer seeking clarity on whether identical tokens issued by different arms of the same company – one with an EU-licence and one outside the EU – would be considered interchangeable, or “fungible”.
The European Central Bank has previously warned of the risk of this approach, saying the reserves held in the EU could be used to meet redemption requests by non-EU token holders. This could “risk undermining EU strategic autonomy/sovereignty”, it said in a document in April.
A European Commission spokesperson said that a run on a “well-governed and fully collateralised stablecoin” was very unlikely.
Non-EU holders of a stablecoin which is jointly issued in the EU and outside the EU would make their redemption requests to the non-EU entity, the spokesperson added.
“Moreover, issuers of EMTs that also issue fungible tokens abroad can be required to have a re-balancing mechanism to ensure that reserves in the EU match token holdings in the EU,” the spokesperson added.
The Financial Times first reported news of the guidance from the EU Commission.
(Reporting by Valentina Za in Milan and Elizabeth Howcroft in Pari)
