Stablecoin Efforts Diverge In EU, UK And Japan As Clarity Stalls

Global stablecoin efforts are diverging.

The regulation of stablecoins around the world is experiencing different national and regional roadmaps. As summer starts, the EU, UK, and Japan are all progressing their own adaptations of stablecoin rules in different ways as subsequent policy changes begin to take shape.

In Europe, the ECB (European Central Bank) and top European Commission leaders have been outspoken on the potential dangers of stablecoins on financial stability of European banking systems.

Member of the ECB Isabel Schnadel had spoken in Seoul as part of an international banking conference and explained that there are three distinct areas of concern: banking disintermediation, changes to monetary policy, and impact to the status quo of international currencies.

Global US dollar stablecoins could create new cross-border networks where dollarisation emerges as a byproduct of the adoption of the new technology, rather than a deliberate currency choice.

Acknowledging the benefits of underlying technology, Schnadel points to a growing concern of sovereignty in Europe and other emerging economies, echoing a similar stance from Christine Lagarde.

Aside from this, there is a clear intent from the ECB to want to limit any potential liquidity concerns (when compared to money market funds), as well as monitor rate changes to wholesale bank funding depending on types of reserve assets that are chosen by stablecoin issuers.

Tokenized deposits are additionally seen as an alternative and are second in priority, with a view that central bank money should be the core settlement asset as both rCBDC (retail Central Bank Digital Currency) and wCBDC (wholesale Central Bank Digital Currency) projects are already underway.

In Japan, there is a new proposal from the Liberal Democratic Party with how digital assets and stablecoins as per Reuters.

Specifically, this piece looks to create clearer regulation and public offerings of digital asset investment products, such as ETFs (Exchange Traded-Funds), as well as encourage a greater promotion of JPY-backed stablecoins domestically, and in regional transactions with large corporations and financial institutions.

In fact, there are several issuers adhering to Japan’s recent FSA guidelines and there is a hope that the currency takes on a stronger share of the stablecoin market.

Over the weekend, Megan Greene, a member of the Bank of England (BoE) actively involved on the policymaking side had attended a conference in Croatia and gave her thoughts on the ongoing debate between the impact of stablecoins and tokenized deposits in an evolving financial system.

Particularly, she had reflected a view that commercial bank money deposits will overtake the growth of stablecoins in a few years’ time.

While the BoE and FCA have split stablecoins into systemic and non-systemic (when it comes to reserve assets, distribution, and custody locations), there is a more cautious sentiment that sides with the EU over the U.S. landscape in that tokenized deposits are likely to play just as an important role (if not bigger).

Recently, BoE Governor Andrew Bailey had stated that he also expects an update clarifying whether or not there will be any revisions to specific stablecoin holding criteria for individuals and businesses.

All this is in much contrast to the U.S., where the Clarity Act is waiting its advancement in the Senate to unlock institutional capital into stablecoins and general tokenized market products.