The European Council and European Commission have said that global stablecoin arrangements cannot operate in the EU until all related risks have been addressed.
According to the authorities, stablecoins can aid cost-effective and quick payments.
However, these digital currencies come with various risks and challenges associated with cyber security, privacy and fair competition, among others.
In their statement, Council and Commission said: “As underlined by the recent report of the G7 working group dedicated to these issues, global stablecoin projects and arrangements should not come into operation until all of these risks and concerns are properly addressed.
“These initiatives should not undermine existing financial and monetary order as well as monetary sovereignty in the European Union.”
The requirement for legal clarity on the stablecoin arrangements status, along with regulatory and oversight frameworks, has also been highlighted.
The Council and Commission are willing to work with the European Central Bank (ECB) and other authorities to address any related challenges. The aim is to create new legislation with a mutual approach to crypto-assets, including stablecoins, in the EU.
ECB, other central banks and national competent authorities are set to investigate the ongoing digital changes to the payment system. They will also analyse the consequences of stablecoin initiatives.
The authorities added: “We welcome that central banks in cooperation with other relevant authorities continue to assess the costs and benefits of central bank digital currencies as well as engage with European payment actors regarding the role of the private sector in meeting expectations for efficient, fast and inexpensive cross-border payments.”
Facebook’s Libra cryptocurrency, which is considered as a stablecoin, has faced opposition from the global regulators, including the EU.