The EU financial services chief calls on the US to create new crypto rules

The EU's financial services chief has urged US politicians to draft sweeping new rules to regulate the crypto industry, warning that digital assets could pose a threat to financial stability if they grow unchecked.

European Commission Financial Services Commissioner Mairead McGuinness told the Financial Times that any regulation imposed on the industry would have to be global in order to work.

"We need to see other actors also legislate," McGuinness said, referring to countries that are starting to follow the EU's lead on crypto regulation, "maybe differently but with the same goal. . . We need to look at global regulation of crypto."

The Irish commissioner spoke during a trip to Washington, DC, where she met politicians including Republican House member Patrick McHenry and Democratic Senator Kirsten Gillibrand at the center of negotiations on Capitol Hill over regulation of the industry.

She said she was encouraged by these meetings and believes US politicians are "heading in the same direction" as those in the EU. But she added: “At the European level there are a lot of concerns about [what would happen] if crypto wasn’t regulated.

"There could be - over time as it grows - issues with financial stability. There are also investor issues related to a lack of certainty."

The EU is internationally recognized as one of the most comprehensive regimes when it comes to cryptocurrencies, in the form of a new set of rules that passed its final phase in the bloc earlier this month. These rules will govern everything from issuing stablecoins to monitoring the industry's environmental impact starting in 2024.

US President Joe Biden has also spoken of the importance of regulating the crypto industry, but members of Congress are divided on how to do this. The Securities and Exchange Commission has taken an aggressive stance toward crypto exchanges, but the coins themselves are still subject to very little oversight.

Those close to negotiations on the Hill say the two parties are still months away from reaching an agreement on key issues such as: B. regulating the $150 billion market for stablecoins – a category of cryptocurrencies backed by real assets such as cash and short-term bonds.

McGuinness' comments echo those from the Financial Stability Board last week, which called for a global framework to guide countries in their crypto regulation efforts.

Earlier this year, popular cryptocurrency terraUSD crashed despite promising investors a measure of stability by pegging its currency to the dollar via an algorithm that automatically increased or decreased the number of coins in circulation.

The crash wiped out $40 billion of holders' funds and sparked concern among regulators around the world about what could happen if the industry continued to grow at its current pace without additional consumer protections.

Members of Congress have said regulating the stablecoin industry is their first priority. They are close to reaching agreement on a draft that would place the industry under the auspices of the Federal Reserve and impose a two-year ban on algorithmic stablecoins like terraUSD.

However, members have not agreed on how strict consumer controls should be for stablecoin buyers, nor exactly how much power the Fed should have over the industry.

Longer-term issues — such as whether cryptocurrencies should generally be considered securities to be regulated by the SEC or commodities to be regulated by the Commodity Futures Trading Commission — are even further from agreement.