The European Commission is considering tough restrictions on the ability of stablecoins to become fiat currency replacements, according to a document seen by CoinDesk.
Officials appear to be echoing the views of European Union finance ministers, who have proposed tough measures aimed at preventing stablecoins such as Facebook's now-defunct Libra from replacing the euro, and requiring issuance to be halted if the number of transactions exceeds 1 million per day. Two people familiar with the talks confirmed the details.
The document is described as a "non-paper," meaning it does not reflect the formal position of the commission. It is one of several documents being produced to influence discussions on issues such as whether crypto companies should be able to register from tax havens.
Lawmakers and governments are trying to finalize the landmark crypto law, known as the Markets in Crypto Assets (MiCA) regulation, with late-night talks behind closed doors brokered by the commission.
National ministers, meeting in a body called the EU Council, want to stop fiat currency competitors if they become too popular. Under their plans, regulators could order issuers of stablecoins that exceed 200 million euros ($211 million) and 1 million transactions per day to stop issuing stablecoins until those numbers fall back below the threshold.
The European Parliament favors a softer approach in which successful stablecoins would be reclassified and subject to supervision by the European Banking Authority.
"The Commission services prefer the Council text that restricts the issuance of ARTs [asset referenced tokens]," the document says, warning that the Parliament's approach of forcing issuers to repay customers what they originally paid for the token would lead to financial engineering that could jeopardize stability.
"The thresholds for monitoring and limiting ARTs, which are widely used as a means of payment, could be further discussed at the policy level," the document says. The commission favors additional measures triggered by specific numerical limits, rather than leaving this to the discretion of regulators.
MiCA introduces measures to ensure crypto assets are well managed, offered honestly to investors, and have adequate reserves, especially when they reach a significant size. The additional proposals would apply to widely used stablecoins, which are tied to a basket of assets rather than a single fiat currency such as the euro.
The issue could decide the future of EU markets, which unlike the U.S. have yet to produce large stablecoins that could support payments and decentralized finance - although news that the UST, which is set to maintain a $1 price, has lost its peg and dropped below 35 cents on Tuesday could draw attention to the importance of sound regulation.
European politicians such as French Finance Minister Bruno Le Maire had previously threatened to block Libra, which was later renamed Diem and then abandoned by Facebook, which later renamed itself Meta (FB).
The European Commission declined to comment to CoinDesk on a leaked document.