European Commission Investigates Crypto Rules for Cross-Border Stablecoins

The European Commission (EC) is currently assessing the adequacy of EU rules on cryptocurrency to safeguard investor redemption rights, particularly for e-money tokens (EMTs) pegged to the value of a single official currency. According to Reuters, this investigation aims to clarify the protections offered under the recently implemented Markets in Crypto-Assets Regulation (MiCAR).

France’s banking and insurance regulator, the Autorité de Contrôle Prudentiel et de Résolution (ACPR), raised concerns last year about whether technically identical and fully fungible EMTs could be issued by entities both inside and outside the EU. Per Reuters, the ACPR sought guidance from the European Banking Authority (EBA), which in turn referred the matter to the European Commission for legal interpretation under EU law.

MiCAR, adopted in 2023, represents a sweeping regulatory framework for crypto assets across the EU. Under these rules, issuers of EMTs are required to secure supervisory clearance and maintain reserves, such as bank deposits, to ensure the ability to redeem tokens for investors upon request. However, the emergence of EMTs issued by entities operating both within and beyond the EU has complicated matters.

Related: The US Stablecoin Landscape: Leveraging Ecosystem Monitoring to Build Trust

One example cited by Reuters is Circle, the company behind USDC, the world’s second-largest stablecoin by market value. While Circle operates its EU business through Circle SAS, USDC tokens issued by Circle SAS are fully fungible with those issued by Circle LLC in the United States. This raises questions about how the MiCAR framework applies to cross-border operations and whether redemption requests can be restricted to EU-based issuers for EU customers.

Andrea Resti, a finance professor at Milan’s Bocconi University, highlighted potential risks of overinterpreting the new rules. “The MiCA regulation already has quite a bit of flexibility built in, to avoid stifling innovation,” he told Reuters. However, he cautioned that introducing interpretations not explicitly outlined in the regulation could undermine its effectiveness and create additional risks.

Meanwhile, regulatory approaches to cryptocurrency continue to vary globally. In the United States, President Donald Trump has pledged to reduce regulatory hurdles for the crypto industry, and the U.S. Securities and Exchange Commission recently established a task force to develop updated rules.

The EU Commission’s review underscores the challenges of aligning regulatory clarity with market innovation in a rapidly evolving sector. France’s ACPR has also raised the possibility of limiting redemption rights to EU-based entities for EU investors but declined to provide further comments on the matter.

Source: Reuters