EU regulators split on stablecoin risk as US moves to expand crypto reach

The European Commission is reportedly in disagreement with the European Central Bank (ECB) regarding the impact of US crypto policies on the region. According to a report by Politico, the commission believes that existing rules can address any risks.

This view contrasts with the ECB, which has called for a review of the Market in Crypto Assets (MiCA) regulations. The central bank believes the MiCA regulations are not adequate to address the risks of US dollar-pegged stablecoins.

The EU passed the MiCA regulations in 2023, and the law became fully effective in December 2024. Although many hailed it as pioneer legislation at the time, the ECB believes that it must be amended to address the impact of crypto industry deregulation under President Donald Trump.

The bank’s top officials believe that US pro-crypto moves could affect the financial stability of European economies, as it could lead to asset flight to the US. They added that redemption of stablecoins in Europe and the US could also bring liquidity risks for European banks.

The concerns echo statements from several top officials of the ECB over the past few months. ECB President Christine Lagarde has warned about dollar stablecoin dominance, while Chief Economist Phillip Lane said the growth of stablecoins could make Europe’s economy dependent on a foreign currency.

The European Commission says ECB’s concerns are alarmist

However, the commission believes that there is no need to amend the rules just yet, and the region should first observe the impact of US crypto reform. They also argued that the ECB is being alarmist.

The commission reportedly said:

“The risks arising from such global stablecoins seem to be overstated and are manageable under the existing legal framework.”

The EU officials claim that ECB concerns are due to a misunderstanding of the MiCA regulation because the law was designed to address those issues. They pointed to restrictions that are already in place under MiCA and the power of the central bank to block any issuer that poses a threat to the region’s financial stability.

Meanwhile, the EU officials who spoke with Politico added that the central bank is exaggerating the risk of stablecoins to get more political support for the planned digital euro. ECB top officials have been promoting the digital euro as the solution to stablecoins risks.

Concerns about dollar-pegged stablecoins are a global issue

Meanwhile, the ECB’s concerns about dollar-pegged stablecoins are unsurprising. It reflects sentiments among several countries that believe that stablecoins spread the influence of the US and further entrench the dollar hegemony.

A Chinese economist, Zhang Ming, wrote about the potential impact of stablecoins to expand US financial power a few weeks ago. Italy’s economy minister, Giancarlo Giorgetti, also said that US stablecoin policy should attract more concerns from the EU than its recent tariffs.

The US dollar accounts for 99% of the $234 billion stablecoins market cap, with the majority of the stablecoins backed by US Treasurys. With the US legislators working on regulations that will better regulate stablecoins and extend their reach, there are concerns that the stablecoin industry could expand significantly.

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