In this news:
The argument sheds light on how jittery financial policymakers generally are about moves by the Trump administration to "expand the reach of the dollar" via complex financial technology. European officials fret that several major financial market reforms the U.S president has touted will undermine efforts to become strategically independent as the EU tries to revamp its financial sector. They worry it will prompt a flight of assets to the U.S. and entrench fresh risks in the system.
This specific clash is about the Markets in Crypto Asset Regulation (MiCA), a landmark law passed in 2023 and heralded as the first regulation worldwide to introduce strong safeguards and consumer protections for cryptocurrency firms. Cryptocurrencies ― digital currencies that can be bought, sold and traded online ― look like being given a new lease on life under Trump, after the industry pumped billions of dollars into his election campaign.
STABLE, GENIUS
At the heart of the recent scuffle is anxiety regarding a popular kind of a cryptocurrency known as a “stablecoin,” which emulates the stability of major currencies like dollars and euros, unlike more volatile cryptocurrencies like Bitcoin. The majority of these stablecoins are denominated in dollars, and in some countries are already used as an easily accessible alternative to the greenback when local currencies are unreliable. Governments fear they could replace traditional money, undermining national sovereignty and leaving citizens vulnerable to the fortunes of a business with a penchant for disastrous meltdown.
In theory, MiCA reduces the risk of foreign-currency-backed stablecoins disrupting the European economy by limiting who can issue them and how much can be issued, while still allowing EU citizens to use them.
But planned reforms in the U.S., including a White House executive order and the drafting of two laws — dubbed STABLE and GENIUS — extend the reach of the American stablecoin industry, with one analysis by British bank Standard and Chartered predicting the supply of dollar-backed tokens could hit $2 trillion by 2028, up from $240 billion today. This has prompted panicked warnings from ECB President Christine Lagarde and its digital payments czar Piero Cipollone.
In recent months, both top officials have suggested that the MiCA rules are not strong enough to withstand the effects of a turbocharged U.S. stablecoin industry, worrying that a flood of dollar-denominated assets into Europe could reroute European savings into the U.S. On Thursday, Lagarde said MiCA would have to change, and implied that the unique threat posed by stablecoins was “understood” by the Commission and other EU institutions.
.png)
