UST collapse triggers regulation, EU Commission considers banning large-scale issuance of stablecoins

According to a document obtained by Coindesk, the European Commission is considering strict restrictions on the widespread use of stablecoins. Commission officials have proposed strict measures that require the suspension of the issuance of stablecoins when the daily transaction volume exceeds 1 million, that is, regulators can order any stablecoin issuer with a market value of more than 200 million euros (211 million U.S. dollars) and more than 1 million transactions per day to stop issuing until these numbers return to below the threshold. Two insiders confirmed the details.

The document is labeled as an “official document,” meaning it does not reflect the Commission’s official position, according to the report. The European Parliament favors a softer approach that would reclassify successful stablecoins and subject them to oversight by the European Banking Authority.

“The Commission’s services prefer a Commission text that restricts the issuance of ARTs [reference asset tokens],” the document said, warning that parliament’s move to force issuers to reimburse customers for the initial purchase of tokens could jeopardize financial stability.

The document reads, “Monitoring and limiting the threshold for ART to be widely used as a means of payment can be discussed further at the political level.” The European Commission does support additional measures being triggered by specific numerical limits, rather than leaving it to regulators to decide.

MiCA introduces measures to ensure crypto assets are well managed, honestly offered to investors and have respectable reserves, especially when they reach significant size. Additional proposals would apply to widely used stablecoins pegged to a basket of assets, rather than to a single fiat currency such as the euro.

The question could determine the future of the EU market, which, unlike the U.S., has not seen the emergence of a major stablecoin that could help payments and decentralized finance. The UST stablecoin, which is supposed to maintain a price of $1, fell below 35 cents on Tuesday, and attention may now be focused on the importance of sound regulation.

As previously reported by Bitpush, at a hearing on Tuesday, U.S. Treasury Secretary Janet Yellen called for the passage of stablecoin legislation by the end of the year and highlighted the risks surrounding TerraUSD (UST), saying: "A stablecoin called TerraUSD (UST) has experienced a crash and depreciation. I think this just shows that this is a fast-growing product and there are risks of fast growth... There are risks to financial stability and we need a proper framework." Yellen said it is "very important and even urgent" for Congress to pass stablecoin legislation.

The Financial Stability Oversight Council (FSOC) has not yet held a meeting to discuss the potential risks of the UST stablecoin depegging, despite the U.S. federal government’s recent statement that stablecoins could pose a growing threat to the U.S. financial system, two people familiar with the matter revealed.