The European Council and Commission have issued a joint statement in which the two bodies call for a “coordinated approach” in regulating crypto-assets.

The statement puts a focus on so-called stablecoins which, given their global nature, pose multifaceted challenges and risks related to consumer protection, privacy, taxation, cybersecurity, operational resilience, and more, the institutions said.

Hence, “tackling the challenges raised by ‘global stablecoins’ requires a coordinated global response” and the Council and Commission said they were willing to act promptly in cooperation with the European Central Bank (ECB) as well as national and European Supervisory Authorities to establish clear and adequate regulatory and oversight frameworks.

According to a Reuter report, the European Commission has already begun working on a new regulation for crypto-assets.

Stablecoins banned from operating in the EU for now

Until the legal, regulatory and oversight challenges and risks are properly identified and addressed, the Council and Commission said that “no global ‘stablecoin’ arrangement should begin operation in the European Union (EU),” ruling out for the time being such initiatives in the region.

They said that some recent stablecoin projects with global aspirations have failed to provide sufficient information on how precisely they intended to manage risks and operate their business.

The institutions urge entities looking to issue stablecoins or carry out activities involving these in the EU to provide full and adequate information in a timely manner to allow for a proper assessment against the applicable existing rules.

The statement is another setback for Libra, a stablecoin project led by Facebook that has attracted considerable criticism from global regulators over its possible impact on the financial system since it was announced in June.

Libra is set to launch by June 2020 but pressure from regulators has already led a quarter of its original backers including MasterCard and Visa to abandon the project.

The statement from the European Council and Commission coincides with a recent report of the G7 working group on stablecoins which noted risks related to money laundering, financial stability, and the international monetary system, among others.

The G7 working group urges public authorities to coordinate across agencies, sectors and jurisdictions, to “support responsible innovation in payments while ensuring a globally consistent response to mitigating risks.”

Switzerland rejects cryptofranc proposal

Last week, Switzerland’s Federal Council published its own report on central bank digital currency. In response to a request from the National Council, the Federal Council examined the opportunities and risks of launching a so-called cryptofranc, or e-franc.

Sharing the views of the Swiss National Bank (SNB), the Federal Council said that at present, introducing a universally accessible central bank digital currency would bring “no additional benefits for Switzerland” and instead “would give rise to new risks, especially with regard to financial stability.”

Other countries have also been discussing central bank digital currency but evidence suggests that China will likely be the first to launch a state-issued digital currency.

The People’s Bank of China has been researching blockchain and digital currency since 2014 but recently accelerated its efforts in response to Facebook’s upcoming Libra stablecoin. According to a local news report, real-world test of the system are set to begin before the end of this year.

Featured image: European Commission, Brussels, Belgium, Pixabay.