​UST Crash Triggers Regulatory European Commission to Consider Banning Mass Stablecoin Issues

According to a document obtained by Coindesk, the European Commission is considering strict restrictions on the widespread use of stablecoins. Commission officials have proposed draconian measures to halt the issuance of stablecoins when daily trading volume exceeds 1 million, meaning that regulators can order any stablecoin with a market capitalization of more than 200 million euros ($211 million) and more than 1 million daily transactions The coin issuer stopped issuing until the numbers returned below the threshold, two insiders confirmed the detail.

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The document was marked as “unofficial,” meaning it did not reflect the committee’s formal position, the report said.

Legislators and the government are trying to finalize a landmark crypto law, Market Regulation in Crypto Assets (MiCA), in late-stage closed-door negotiations. The European Parliament favours a more moderate approach, reclassifying successful stablecoins and subjecting them to oversight by the European Banking Authority.

“The European Commission’s service sector prefers Commission texts restricting the issuance of ART [reference asset tokens],” the document said, warning that the parliament’s practice of forcing issuers to reimburse customers for initial token purchases could jeopardize financial stability.

“There can be further discussions at the political level to monitor and restrict ART thresholds that are widely used as a means of payment,” the document reads. The committee does favor additional measures triggered by specific digital limits, rather than leaving it to regulators’ discretion.

MiCA has introduced measures to ensure that cryptoassets are well managed, offered honestly to investors and have substantial reserves, especially when they reach a considerable size. The additional proposals would apply to widely used stablecoins pegged to a basket of assets, rather than stablecoins pegged to a single fiat currency such as the euro.

This question could determine the future of the EU market, which, unlike the US, has no major stablecoins that could help with payments and decentralized finance. The decoupling of the UST stablecoin, which was supposed to hold its price at $1, fell below 35 cents on Tuesday, drawing attention now to the importance of sound regulation.

At Tuesday’s hearing, U.S. Treasury Secretary Janet Yellen called for stablecoin legislation to be passed by the end of the year and highlighted the risks surrounding TerraUSD (UST), saying: The stablecoin called TerraUSD (UST) went through a crash and depreciated. I think it just goes to show that this is a fast-growing product, and there is a risk of fast growth… There are risks to financial stability, and we need a proper framework.” Yellen said it was “very important, even urgent” for Congress to pass stablecoin legislation.

The Financial Stability Oversight Council (FSOC) has yet to hold a discussion meeting on the potential risks of UST de-pegging, despite recent federal government signals that stablecoins could pose a growing threat to the U.S. financial system, two people familiar with the matter said.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/ust-crash-triggers-regulatory-european-commission-to-consider-banning-mass-stablecoin-issues/
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