The European Union (EU) countries Germany, France, Italy, Spain and the Netherlands have demanded the European Commission to impose stricter restrictions on asset-backed cryptocurrencies such as stablecoins.
The countries aim to protect consumers and government sovereignty through this measure.
The European Union is a political and economic union of 27 Member States, primarily located in Europe while the European Commission is the executive branch of the EU which is responsible for implementing legislation and overseeing the day-to-day operation of the EU.
In a joint statement, the finance ministers of the five EU member states said that stablecoins should not be allowed to work in the 27-member community until legal, regulatory and oversight challenges are addressed.
Stablecoins are a type of cryptocurrency backed by traditional assets that jumped into the agenda of policymakers last year when Facebook unveiled plans for the Libra token.
Libra is the first digital blockchain currency developed by the social media giant, Facebook. The currency and network do not exist yet and only the basic experimental code has been released.
Some central banks and financial regulators, fearing that the Libra could destabilize monetary policy, facilitate money laundering and undermine privacy, threatened to block it due to which the plan has been delayed and redesigned.
The EU’s regulatory framework for stablecoins should protect the monetary sovereignty of the countries and address the risks of monetary policy and protect consumers, says the statement issued by the five countries at the meeting of European officials in Berlin.
Olaf Scholz, German Finance Minister said, “We all agree that it’s our task to keep the financial market stable and to ensure that what is a task for states remains a task for states”.
“We’re waiting for the Commission to issue very strong and very clear rules to avoid the misuse of cryptocurrencies for terrorist activities or for money laundering,” stated Bruno Le Maire, French Finance Minister.
Later this month, the European Commission is expected to present its regulatory recommendations over the issue.