The European Central Bank is demanding a veto right from the European Union on private stablecoin projects such as Diem.
The European Central Bank has now sent a formal statement on crypto regulation to the European Commission
According to Reuters, the ECB, the EU lawmakers to veto private Stablecoin projects like Diem Facebook asked . An excerpt from the ECB document states:
„If an asset reference scheme equates to a payment system or a payment scheme, the assessment of the potential threat to monetary policy and the smooth functioning of payment systems should be the sole responsibility of the ECB.“
As part of the call for a veto right against stablecoins, the ECB has called on the EU to ensure that its decision should be binding on all national authorities in the euro zone. According to the ECB, stablecoin issuers must meet the same stringent liquidity requirements as banks and other incumbent financial institutions.
The ECB believes that some „strict liquidity requirements“ are necessary to ensure the protection of the right of return and direct customer claims on the reserve assets held by stablecoin issuers.
The ECB already expressed concerns in September 2020 about a possible „bank run“ on stablecoins
If EU lawmakers grant the ECB veto rights, private stablecoin issuers like Diem could face further regulatory hurdles, even if the project is approved by Swiss regulators.
ECB President Christine Lagarde is a well-known critic of stablecoins and cryptocurrencies in general. As Cointelegraph reported, Lagarde recently ruled out that central banks could one day hold Bitcoin ( BTC ). The topic came up because publicly traded companies have recently invested in the largest cryptocurrency by market capitalization.
Regarding the digital euro, the ECB said it was working towards its introduction within the next four years. However, a digital euro developed by the ECB would be exempt from the existing EU laws for digital currencies.