EU centralizes market oversight in targeting ‘stable coins’

The EU has embarked on a push for greater centralized supervision of financial markets, setting out an oversight regime for crypto assets and pledging to learn from the German Wirecard scandal.

The European Commission last month proposed a regulatory system for so-called stablecoins, such as the Facebook-backed Libra initiative, and other cryptocurrencies, saying that the bloc must adopt its rules to rapid technological innovation in the financial sphere. The plans include handing some key powers to EU-Level authorities.

The measures were unveiled alongside a broader push for uniform application and oversight of EU financial market rules, a cause Brussels linked to its drive for more strategic autonomy, and said was more important given the City of London’s exit from the bloc.

To us it seems that Brussels now is looking at further work towards central European supervision in the new era of European capital markets after Brexit.

According to Valdis Dombrovskis, commission executive vice-president for economic policy, crypto assets were a particular area where “a co-ordinated, centralized approach would be warranted” given the cross-border nature of the business.

Under EU cryptocurrency plans, issuers of “significant” stablecoins would be supervised by the European Banking Authority, an EU agency. Stablecoins such as the Libra project are so named as they are tied to existing fiat currencies (US-Dollar, Euro, etc), giving them stability. Cryptocurrencies such as Bitcoin have become notorious for their price swings.

The plans would also set requirements for the crypto asset industry on everything from capital requirements to governance standards, in exchange for the products being allowed to be bought and sold across the single market.

Mr. Dombrovskis said the measures were not aimed at stifling innovation but were about setting clear rules to allow new technologies to flourish.

Regulators in Switzerland and the UK have gone further in setting out plans to regulate crypto assets, hoping to become key hubs for emerging digital currencies.