Bank of Italy deputy governor Chiara Scotti on Thursday urged the European Union (EU) to provide clear guidance on cross-border stablecoins in order to avoid legal risks and financial stability problems.
Speaking at the National Conference of Central Banks in Rome, Scotti highlighted the need for the EU to define how to deal with stablecoins issued outside the bloc but redeemable within.
According to the official, the absence of a harmonised framework could expose users and markets to greater uncertainty and systemic vulnerabilities.
The EU and the Stablecoin Cross-Border Dilemma
Euro-denominated stablecoins have been defined by European regulators as euro-denominated electronic money tokens (EMT). However, there remains a heated debate among EU institutions on how to regulate a 'multi-country issuance' model.
According to a Reuters report from June, the European Commission believes that existing laws may already allow for cross-border interchangeability of these digital currencies.
This arrangement can increase liquidity and scalability globally," Scotti said. "But when the issuer is outside the EU, it creates serious legal, operational and stability risks.
The ECB: Avoiding Systemic Risks
The European Central Bank (ECB), on the other hand, has publicly called for clear legislation to reduce unforeseen risks to financial stability.
Without clear rules, Scotti added, it becomes difficult to manage operations and liquidity. He also explained that European issuers of stablecoins could receive redemption requests from foreign holders. In a multi-country model, non-EU subsidiaries would have to transfer resources to fill reserve shortfalls, thus reducing liquidity and creating operational frictions.
Risks for Financial Stability
According to Scotti, the absence of 'clear rules' leads to legal and operational risks that could destabilise markets. He added that new legislation or standard-setting would be "timely and useful" to ensure that the system remains resilient and able to absorb shocks.
The European Case and the MiCA Framework
The EU aims to make stablecoins a more efficient instrument for cross-border payments, but concerns about market stability remain high.
The debate has intensified as the implementation of the Markets in Crypto-Assets (MiCA) regulation, designed to create a unified approach to digital assets, proceeds.
Despite the progress, it remains unresolved how to apply the regulation to stablecoins issued in multiple countries. According to observers and market participants, regulatory uncertainty is growing and the next steps of lawmakers will be crucial for the future of stablecoins in Europe.
