Terra Meltdown Concerns European Officials; Calls for Legislation Renewed

European officials have called for immediate regulation of crypto in light of the Terra-led market crash.

Bank of France Governor Francois Villeroy de Galhau said at a conference: “Crypto-assets could disrupt the international financial system if they are not regulated, overseen and inter-operable in a consistent and appropriate manner across jurisdictions.”

Fabio Panetta, a member of the executive board of the European Central Bank, highlighted that “stablecoins are vulnerable to runs.” 

Terra collapse illustrates private instruments as money is an ‘illusion’

“Recent developments in the market for crypto assets illustrate that it is an illusion to believe that private instruments can act as money when they cannot be converted at par into public money at all times, “said Panetta.

He added: “There is no guarantee that they [stablecoins] can be redeemed at par at any time – just last week the world’s biggest stablecoin temporarily lost its peg to the dollar.”

Meanwhile, as calls for heavy crypto regulations intensify, Karel Lannoo, Chief Executive Officer at the Centre for European Policy Studies (CEPS) raised supervision problems in EU’s MiCA proposal, in a recent Financial Times op-ed.

“Supervision is very limited and split between national or European regulators. Under the proposed rules, it is much easier to start a crypto exchange than a traditional exchange,” he argued

Lannoo added that provisions against market manipulation and insider trading are not as tight as under existing laws for traditional markets. He remarked: “The EU would have been better off considering crypto under existing laws, rather than creating a new regulatory framework.”

Meanwhile, the U.K. is also pushing for stablecoin regulation with no plan to include algorithmic stablecoins in the guidelines. 

A spokesperson from the Treasury noted: “Legislation to regulate stablecoins, where used as a means of payment, will be part of the Financial Services and Markets Bill, which was announced in the Queen’s Speech.”