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Bank of France Targets 98% USD Stablecoin Share Under MiCA
Regulators fear dollarization threatens Euro sovereignty. Expect stricter reserve mandates as ESMA and EBA weigh new technical standards for crypto issuers.
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The Sovereign Risk of Dollar Hegemony in Digital Assets
The Bank of France has issued a stark warning regarding the structural composition of the stablecoin market, calling for an urgent re-evaluation of the Markets in Crypto-Assets (MiCA) regulation. At the heart of the central bank’s concern is the overwhelming dominance of the U.S. dollar as the underlying peg for global stablecoins, a concentration that French regulators argue poses a tangible threat to European monetary sovereignty and financial stability.
Recent data cited by the Bank of France highlights that a staggering 98% of stablecoins currently in circulation are pegged to the U.S. dollar. For European policymakers, this creates a situation where the digital asset landscape is effectively tethered to the monetary policy and fiscal health of the United States, circumventing traditional European financial channels and potentially undermining the international role of the Euro.
Why MiCA Is Under the Microscope
MiCA, the European Union’s comprehensive framework for regulating crypto-assets, was designed to provide legal certainty and consumer protection across the bloc. However, the Bank of France believes the current iteration of the regulation may be insufficient to address the systemic risks posed by dollar-backed stablecoins.
Regulators are particularly concerned that the widespread adoption of non-Euro denominated stablecoins could lead to a 'dollarization' of the European payments ecosystem. If a vast majority of digital transactions within the EU are conducted using assets backed by USD reserves, the ability of the European Central Bank (ECB) to influence domestic financial conditions could be eroded. The Bank of France’s stance suggests that future amendments to MiCA may seek to force issuers to maintain larger portions of their reserves in Euro-denominated assets or impose stricter liquidity requirements for stablecoins that do not utilize the Euro as their primary peg.