To become a global digital leader, Europe needs a diverse and competitive digital ecosystem.

Europe knows that it will soon have to create a digital euro. To become a global digital leader and avoid reliance on US and Asian technology infrastructure, European policymakers and regulators need to make groundbreaking decisions.

Stablecoins are a central obstacle to Europe’s digital economic thinking. Stablecoins are easily issued by private investors, have the potential to be accepted worldwide, and involve the system thereby disrupting established financial systems. As a result, political discussions about stablecoins today are dominated by concerns about financial stability and an orderly monetary policy.

Current management plans stifle innovation

The European Union (EU) Cryptocurrency Asset Markets (MiCA) Regulation aims to become a comprehensive regulatory framework for cryptocurrency assets, including stablecoins. Its current scope changes as the European Parliament and Member State governments grapple with draft texts that offer legal certainty, possibly at the expense of considerable complexity. As a result, issuing stablecoins in Europe is likely to require a banking license, which favors established financial players and is not necessarily too innovative. In fact, the entire regulatory burden of MiCA can be very costly, and those with significant regulatory resources are most likely to be compliant, especially the big banks and big tech.

This does not mean that regulators should just stop what they are doing, as we need to reduce risks and mitigate negative externalities at all levels. However, European citizens and businesses will want to fully participate in the global digital economy and need access to tools like stablecoins, practically independent of regulations. Citizens will expect consumer-friendly payment solutions to protect their privacy, and businesses need programmable money to modernize and expand. None of these should be aimed at non-EU solutions or exchanges, which are often unregulated and without consumer protection just because European regulations have accidentally stifled innovation: Europe’s new and self-developed solutions.

The euro’s global relevance also depends on its approach to stablecoins

While Europe is free and working according to its plan, stablecoins have become a central part of the global digital economy, driving innovation, expansion and growth. It’s no surprise that the top stablecoins are now pegged to the US dollar. More than 100 billion US dollars are traded digitally every day via protocols such as Tether (USDT) or USD Coin (USDC), the equivalent daily euro trading volume is close to zero.

In essence, today’s stablecoin projects are making the global dollarization of the blockchain ecosystem easier by distributing US coins seamlessly and easily around the world. The same can of course be achieved with a digital euro if we can get it going.

The digital economy of the future will be characterized by an increasing variety of business models and use cases. It will require multiple payment systems and solutions that incorporate digital currencies running on multiple infrastructures to coexist and complement each other.

Europe not only needs to recognize the importance of the digital euro for the future of the European economy, but also the need for different types of digital euro. Ideally, this would include not only the Euro Central Bank’s (CBDC) digital currency, but separate stablecoins referencing the Euro and other methods as well.

Promoting European innovation by promoting diversity and a level playing field

To achieve global digital leadership, Europe needs a diverse, competitive digital ecosystem. This will enable the creation of its own solutions able to compete with global giants and nimble innovators from East and West.

The regulatory requirements should be balanced and proportionate for all parties involved and should not have a negative impact on startups, grassroots innovators and smaller companies.

Maintaining a truly level playing field is crucial to fostering the dynamic digital development that Europe needs and regulatory frameworks that are too strict or punitive will only strengthen existing dictatorships in technology and finance.

The EU is a huge, growing economic bloc with huge digital potential, but becoming a leading digital economy in the world is not an obvious conclusion. The wrong political and regulatory decisions in Europe will not stop innovating and investing in stablecoins and other distributed ledger solutions and infrastructures, but will only get them out of the EU and prevent their return.

The EU is at a turning point. MiCA will be the norm that other jurisdictions must follow or avoid. Europe must be a catalyst for digital currencies, not a stimulus, and it must support various digital euro solutions if it is to remain geopolitically relevant. If Europe can move beyond narrow and defensive views to take a broader look at stablecoins that reflect the realities of their diverse structures, economic functions, technological designs and governance requirements, Europe can lead the global digital economy of the future.

Mr. Teacher

According to Cointelegraph

Follow the Youtube Channel | Subscribe to telegram channel | Follow the Facebook page