European Central Bank Expresses Concerns Over U.S. President Trump’s Support for Cryptocurrency
The European Central Bank (ECB) has expressed deep concerns regarding U.S. President Donald Trump’s recent evident support for the cryptocurrency industry, particularly highlighting the potential risks of “contagion” associated with the expansion of stablecoins, which could jeopardize economic stability in Europe.
Background
According to a policy document obtained by Politico, the ECB warns that the Trump administration’s active promotion of favorable policies for cryptocurrency, especially the expansion of dollar stablecoins, may pose contagion risks to the global financial system, thereby impacting and endangering Europe’s economic stability.
Deep Concerns Over Trump’s Cryptocurrency Policies
The ECB believes that this policy shift could lead to significant capital flowing into U.S. crypto assets, particularly dollar stablecoins. As a bridge connecting traditional finance with the crypto world, the rapid expansion and widespread application of stablecoins may amplify potential financial risks.
Reflecting on the last crypto winter, the collapse of FTX not only resulted in substantial losses for investors but also triggered a series of trust crises and liquidity strains, leading to the downfall of several related institutions and causing market confidence to plummet. The ECB fears that if the U.S. aggressively promotes the global application of dollar stablecoins, backed by its strong dollar status and lax regulatory policies, any problems faced by these stablecoin issuers or abrupt shifts in U.S. regulatory policies could quickly spread negative impacts through the global financial network, creating an uncontrollable contagion that would also affect the European economy.
MiCA Regulation Faces Challenges from U.S. Stablecoins
It is known that the European Union passed the landmark Markets in Crypto-Assets Regulation (MiCA) in 2023, aimed at establishing a comprehensive regulatory framework for crypto asset service providers to protect investors and maintain financial stability.
Under MiCA, restrictions have been placed on the issuance and circulation of stablecoins, particularly those backed by foreign currencies (like the dollar), in order to control the scale and influence of non-euro stablecoins within the EU, thereby preserving the monetary sovereignty and financial stability of the eurozone.
However, two new draft bills currently brewing in the U.S. — the STABLE Act and the GENIUS Act — appear to primarily aim at expanding the influence of dollar-backed stablecoins. The potential advancement of these two bills has caused unease within the ECB.
ECB policymakers are concerned that even with the existence of MiCA, its strength may still be insufficient to effectively counter the impacts and potential risks posed by the strong dollar stablecoin policies from the U.S. They worry that U.S. regulations might create a more attractive environment for dollar stablecoins to gain larger market shares globally (including Europe), thereby undermining the effectiveness of MiCA and increasing the risk exposure of the European financial system.
Internal Divergence in the EU: ECB vs. European Commission
However, there seem to be differing views within the EU regarding the potential threats posed by U.S. stablecoins. According to Politico, the European Commission holds a reserved attitude towards the ECB’s analysis and warnings, even contradicting them.
The Commission believes that the ECB may be overstating the threats from U.S. crypto policies, particularly stablecoins. Some EU officials have privately revealed that the ECB emphasizes the risks of stablecoins partly to garner political support for advancing its own controversial “Digital Euro” project.
The Digital Euro is a central bank digital currency (CBDC) that the ECB is exploring, aiming to provide European citizens with a secure and reliable digital payment option while addressing challenges posed by private digital currencies (like stablecoins) and foreign CBDCs. However, issues regarding the design, privacy protection, and its impact on the existing banking system continue to generate extensive discussion and concern within the EU. Therefore, leveraging external threats (like U.S. stablecoins) as a rationale for advancing the Digital Euro naturally invites some skepticism.
Nonetheless, it is undeniable that the legislative progress in stablecoin regulation in the U.S. presents new variables and challenges for regulatory bodies and policymakers in Europe and globally. The transatlantic competition surrounding cryptocurrency regulation, the influence of stablecoins, and central bank digital currencies is expected to continue affecting the evolution of the global financial landscape.
