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ECB wants veto power on stablecoins in the euro zone

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·2 min read
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FRANKFURT, Feb 23 (Reuters) - The European Central Bankwants veto power on the launch of stablecoins such as Facebook'sDiem in the euro zone and a greater role in theirsupervision, it has told European Union lawmakers.

Central bankers around the world are worried that the riseof cryptocurrencies, especially stablecoins which derive theirvalue from one or more official currencies. They fear that coulddent control over payments, banking and, ultimately, the supplyof money.

The EU set out plans in September to create comprehensiverules for crypto-assets, including stress tests as well ascapital and liquidity requirements, saying Facebook would haveto adhere to them before launching its proposed stablecoin inthe bloc.

In a legal opinion on the EU rules, the ECB said it shouldhave the final word on whether a stablecoin should be allowed tolaunch in the euro zone without jeopardising its control overinflation or the safety of payments.

"Where an asset-reference arrangement is tantamount to apayment system or scheme, the assessment of the potential threatto the conduct of monetary policy, and to the smooth operationof payment systems, should fall within the exclusive competenceof the ECB," the ECB said in the opinion dated Feb 19.

It added the proposed EU rules should be changed to say thatits opinion on the matter is binding for national authoritiesassessing applications to issue stablecoins.

Facebook was originally planning to launch a stablecoin,named Libra, backed by a basket of official currencies, but itscaled down the project last year after a regulatory backlash.It now aims for a dollar-backed digital coin, named Diem.

The ECB said issuers of stablecoins should be subject to"rigorous liquidity requirements" similar to those applied tomoney market funds, including significant cash reserves, to helpthem withstand large client outflows.

Companies selling tokens linked to several currencies"should at a minimum grant end-users a direct claim on theissuer or on the reserve assets and redemption rights", the ECBadded.

The ECB is working on its own digital euro, hoping to launchit within the next four years. It won't be subject to EU ruleson private digital currencies.

ECB President Christine Lagarde said in a Reuters interviewlast month that regulation of cryptoassets like bitcoin shouldbe global to close all loopholes.(Reporting by Francesco Canepa; Editing by Nick Macfie)