ECB Warns that US Crypto Growth Could Contagion Financiere Across Europe
The European Central Bank (ECB) is sounding the alarm about the spill over effect of the growing popularity of the crypto market, or more precisely, the recent growth of dollar-denominated stablecoins in the United States. The group now is calling for reforms in the approved Markets in Crypto-Assets Regulation, citing issues related to the undermining of EU financial sovereignty.
US Stablecoins Would Call into Question EU Stability
According to a leaked ECB policy document, there is growing concern that US stablecoins will flood European markets. The ECB is concerned that this will result in European assets being driven out by US-based assets, threatening liquidity within European banks and watering down regional authority over money flows.
With the US legislative moves such as the STABLE and GENIUS bills pending, the ECB fears that such adjustments would further solidify the dominance of the dollar in European digital space.
Regulatory Tensions Within the EU
Despite ECB warnings, the European Commission reportedly has dismissed concerns, calling them premature. Politico sources revealed internal disagreement, where the Commission claimed MiCA is already robust enough to manage new stablecoin dangers.
A diplomat quoted in the report was saying, “Not very many (countries) supported the idea that we should now push the gun and start making hasty changes to the rules based on this alone.”
Stablecoin Market and EU Exposure
With the global stablecoin market now valued at $234 billion, European regulators are worried about potential redemption pressure from EU and foreign investors. The ECB cautions that this would set off a financial “run,” with ripple effects throughout the continent’s financial institutions.
Crypto market participants concur with the ECB on this. CEO of Trading Strategy Mikko Ohtamaa attributed lobbying by banks for leading MiCA to squander the EU’s first-mover advantage with an excessively burdensome regulatory environment that suffocated local stablecoin competitiveness.
Tether Still at Odds with EU Framework
Tether, the creator of the most popular stablecoin USDt, has been actively vocal in its criticism of MiCA’s regulation. CEO Paolo Ardoino has warned that MiCA’s reserve requirements—requiring a minimum of 60% of stablecoin reserves to be held in EU bank accounts—pose systemic risks to stablecoins and the banking sector.
For failing to comply, USDt has been removed from top European cryptocurrency exchanges like Coinbase, Crypto.com, and Kraken, challenging MiCA’s long-term viability and the future of the EU in crypto.
