Despite his landmark Markets in Crypto Assets (Mica) Regulation The European Union is fully in January in January is under pressure from the European Central Bank (ECB) and a leading trade body to introduce new regulation so that it does not fall behind its international comrades.
ECB President Christine Lagarde on Monday called on European legislators to accelerate the introduction of legislation supporting the launch of a Digital euros. Meanwhile, a few days earlier, the European Fund and the Asset Management Association (EFAMA) published a guide that recommended an updated regulation for tokenization.
ECB Want Digital Euro Framework
EU has investigated the possibility of a digital euro Central Bank digital currency (CBDC) for several years. The European Commission proposed digital euro law in June 2023 and ECB Launched the digital euro ”Preparation phase“In November of the same year, but the progress has been slow since then.
In February announced It extended its initiative to resolve transactions between institutions with a wholesaler CBDC payment system. The following month, ECB’s President Law confirmed The bank’s commitment to the project and said that the team behind the digital euro was “focused on speeding up the pace” and highlighting how they are campaigns to get other important stakeholders on board.
Lately, on May 5, ECB announced that it had established an “innovation platform” to cooperate with European stakeholders on Digital Euro project. The project’s test phase is finally scheduled in October, after which the ECB will publish a final report and decide whether a CBDC will issue.
But to do so, it would need the European Parliament to adopt legislation, which has not come.
On Monday, Lagarda renewed its basis for the European Parliament, and described the digital euro as the key to Europe’s financial autonomy and aimed to compete, privately issued digital currencies called Stablecoins.
“A legislative framework for paveing the way for the potential introduction of a digital euro should be introduced quickly, please,” lawyer told A hearing by the Committee on Economic and Monetary Affairs in the European Parliament on June 23.
Legislation on a digital euro has been hindered by determination and doubt from EU legislators. Fresh doubt was raised in February when an interruption in ECB’s Pan -European Target 2 Securities (T2S) platform, which is used to complete business in cash and securities In the 24 countries that share the euro, together with the central banks and the ECB, an error reported in their communication channels.
In the end, the interruption was fixed fairly quickly and lasted only 10 hours, but the short -term chaos it caused was enough raise questions About the central bank’s ability to deliver a digital European project.
To win back support for the project and add a sense of regulatory urgent to the mixture risks that the growing Stablecoin market is placingEspecially in the United States.
“Stablecoins are issued privately and pose in particular the risks of monetary policy and financial stability,” Lawy said. “These assets cannot always maintain their fixed value and compromise with their usability as a means of payment and a store of value.”
Lagarde also noted that most major jurisdictions, including the United States, still do not have regulations in place for Stablecoins, and the issuer of the largest Stablecoin, Tether, was based in El Salvador, “which lacks any precautionary frame” for this product. Furthermore, she suggested that a potential change in deposits used for payments and savings – from banks to Stablecoins – could affect the monetary policy transfer through banks.
While praised the MICA Regulation for its “sound rules” related to Stablecoins, “minimizes the risks to consumers and financial stability,” insisted on the laws that in connection with the growing Stablecoin market and the influence of the United States, “accelerate progress towards a digital euro is a strategic priority.”
She claimed that in addition to dealing with some of the risks that Stablecoins poses, “a digital euro would help protect Europe’s bank -based financial and monetary systems. It would not only strengthen Europe’s strategic autonomy, but it would also ensure an innovative and resistant European retail system.”
To end its pitch for the digital euro quoted lawyer the French author Émile Souvestre, who observed, “there is something more powerful than strength than courage, than Geni himself: it is the idea whose time has come.”
However, the ECB president was not the only one to show the heat on the legislative efforts from the EU legislator this week.
Efama requires tokenization legislation and changes to the DLT Pilot regime
On June 20, Efama, an industry organization that represents the fund management and asset management industry in Europe, published a report that praised the progress in the tokenization space in Europe but expresses “concerns that Europe’s early management could be wasted if the regulation does not keep up with the market development.”
“Practitioner’s guide to tokenization“Included an overview of how tokenization shakes up the asset management industry, the global context when other jurisdictions move to enable digitalisation and a” how to “tokonization for fund managers.
“A number of European jurisdictions have emerged as a hub for DLT assets, driven by national legal framework for custody and transmission of digital securities, as well as the broader European framework for non-traditional crypto assets (MICA) and trade and settlement (settlement (settlement (settlementDlt pilot regime), “Said Efama.” The level of activity among companies shows how important a digital strategy is to adapt to the future tokenized economy. “
In accordance with For data from Horizon Grand View Research, the European tokenization market generated revenue of $ 821.4 million in 2024 and is expected to grow with a compound annual growth rate (CAGR) of 20.9% from 2025 to 2030.
In order to support this thriving market, Efama recommended increased regulatory convergence between divergent national rules for digital assets over the Block’s 27 member states and said that “stronger convergence would prevent regulatory bites and help promote scale in DLT-based investment funds.”
This convergence would include the regulatory frames for traditional assets, for example MiFID IIAnd those for digital assets, namely the DLT pilot regime and mica.
“As Defi grows, it should not differ between the traditional ecosystem and the DLT-based ecosystem, but rather a single integrated financial ecosystem,” Efama said.
Another change that the argued for was regulatory clarification to support the uptake of tokenized money market funds (T-MMF)-rule-bound money market funds that turn into Digital symbols on a blockchain– As security in the derivative margin and repurchases transactions.
“All efforts should be made by regulatory authorities, central banks and the industry to ensure that T-MMFs are used for their full potential,” the industry association claimed. “The EU will need to prioritize streamlined policies and practical initiatives – on what Mica’s and DLT pilots deliver – to promote tokenized asset growth in Europe.”
In this regard, Efama also proposed a clear level for chain-on-chain solutions and promoting a competitive landscape that includes a digital euro, Mica-regulated Stablecoins and Commercial Bank Money-tokens. This, claimed, would be “the optimal outcome signal that Europe is open to innovation and market -led forces.”
The alternative, warned the trade body, would not keep up with developments in other jurisdictions and thereby abolish the early advantage that the EU acquired with the DLT pilot and landmark -Mica regulation, at a decisive time “where scale is everything.”
This was emphasized by Peter Kersten’s adviser to the European Commission, who said in the report that “in the race to establish dominance in DLT, we do not want Europe to become a Flyover zone between the United States, the Middle East and Asia.”
With regard to the EU’s DLT -Pilot regime, Efama’s most pressing proposal was an “immediate increase” to threshold boundaries that were introduced to “increase available liquidity on DLT platforms and improve trade volumes in the secondary market.”
DLT -pilot limits
The DLT pilot regime began in March 2023 to create a market infrastructure for trading in financial instruments based on distributed main technology (DLT).
It provided the judicial framework for trading and decommissioning of transactions in digital assets that qualify as financial instruments under MiFID II, while facilitating the setting of new types of market infrastructures, including DLT multilateral trade in trading, including DLT multilateral trading facilityThe DLT Settlement System and DLT Trading and Settlement System.
The DLT pilot currently applies only to shares and units in collective investments of less than $ 500 million ($ 580.9 million) and debt securities with an emission size of less than EUR 1 billion ($ 1.16 billion). It also sets a DLT market infrastructure limit of € 6 billion ($ 6.9 billion). If this is exceeded, the operators of the DLT market infrastructure would be required to activate a special transition strategy to reduce trade activity on their platform.
In her guide, Efama claimed that the DLT pilot regime would be changed to increase thresholds on justified instruments.
“This will have an immediate positive effect on i) market interest in providing DLT-based trading and decommissioning platforms and ii) available liquidity on such platforms and improved trade volumes in the secondary market,” said the trade body.
However, the guide did not specify what the new boundaries would be.
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