The European Central Bank has demanded veto power from lawmakers in the European Union over private stablecoin projects like Diem.
The European Central Bank has finally sent its formal opinion on crypto regulations to the European Commission.
According to Reuters, the ECB has asked EU lawmakers for veto powers concerning private stablecoin projects like the Facebook-backed Diem. An excerpt from the ECB opinion document reads:
“Where an asset-reference arrangement is tantamount to a payment system or scheme, the assessment of the potential threat to the conduct of monetary policy, and to the smooth operation of payment systems, should fall within the exclusive competence of the ECB.”
As part of the demand for veto powers on stablecoins, the ECB has urged the EU to ensure that its ruling should be binding on all national authorities in the Euro Zone. According to the ECB, stablecoin issuers must comply with the same robust liquidity requirements as banks and other mainstream financial institutions.
For the ECB, some “rigorous liquidity requirements” are necessary to ensure the protection of redemption rights and customers' direct claims to the reserve assets held by stablecoin issuers.
Indeed, the ECB has previously stated its concerns about a possible “bank run” on stablecoins back in September 2020.
If EU lawmakers grant veto powers to the ECB, then private stablecoin issuers like Diem could be in for further regulatory hurdles even if the project secures approval from Swiss regulators.
ECB President Christine Lagarde is a noted critic of stablecoins and cryptocurrencies in general. As previously reported by Cointelegraph, Lagarde recently ruled out the possibility of central banks one day holding Bitcoin (BTC) amid the wave of public corporations adding the largest crypto by market capitalization to their balance sheets.
On the subject of a digital euro, the ECB revealed that it was working towards a launch within the next four years. However, any digital euro developed by the ECB will be exempted from the existing EU digital currency laws.