Panel | Balancing Consumer Protection and Global Competitiveness through Regulation

So thank you for uh this panel. Um we will discuss um how we can balance consumer protection and global competitiveness through regulation. I will um jump in or maybe should I present all the speakers? U so maybe first u oh let's do it yourself. So if you want to introduce

Okay. Yeah. Good afternoon. My name is Julian. Actually I'm working for the European Securities and Market Authority.

So the ESMA um where I'm in charge of digital finance topics. So basically uh what we are doing is that we are working on the regulation applied to digital finance for example on the crypto asset market uh but also on the tokenization more more broadly. So happy to be here.

Yeah. Hi, I'm Yon. I'm a co-founder of Monerium. Monium is a is the company that uh issued uh licensed and authorized stablecoin in 2019. First company to do so.

Um and the first uh digital euro in that sense um offered by Monalian. Um now I'm uh we're focusing on the euro is of course uh our focus uh but as we know then the uh US dollar is denominating the stable coin market. So our focus is now on how do we um become more successful with the euro in general.

Hello everyone. I'm Rodel Baruk. I'm part of the strategy division of BBC of French banking group and previously I was part of the French surgery. who was part of the team negotiating Mika the Mika regulation was part in charge of the regulation of crypto in in France. We have a really qualified panel today and we go go into a lot of geeky details but let's start with some econas question for you John to start and you can jump in after.

Um so are the current stable stable coin regulation in your view like really protecting the consumer or are they more designed in the end to protect the financial system as it is today? Well, um the question is the consumer protection and competition or competitive advantage in conflict? Uh my response to that is always no because it's basically the same thing. You have to make sure that the your product is uh protecting the consumer and if that is the case then you have a competitive product. So I think that's really important.

Now your question Javier is you know is the current regulation um basically protecting the incumbents. Yes it is. Um we can go through this in in detail and as we know then um Mika was a response to Libra and the aim the unofficial aim was to kill stable coins and voila here we are we have Mika and it is really bad uh and it is becoming more and more obvious uh since we now see other jurisdictions moving ahead and they do things in a different way, more rational, more progressive and frankly speaking than the Europeans. They will have to step up. They will have to revise Mika in order to be competitive on a global stage.

I can go into this in detail if you want, but uh I'm not going to dominate the the talk here.

Yes, I I think regulation must not oppose uh customer protection, investor protection [clears throat] and uh innovation. I think the former is really the the condition of the latter and uh Mika and partly agree with what you you said but we are really far from the initial the initial ambition. The initial ambition were really to find the right equilibrium between innovation and customer protection and now it's it's much more complicated and to to to rebuild a fullyfledged regulation based on the traditional regulation fee the DSP and so on. So it's really it was really really complicated to to find the right right equilibrium. Uh for instance about money token it was based on DSP and money regulation.

So it's it was really difficult to find the the right the right border but and uh now uh Mika has not been completely implemented that we are still calling into question Mika uh in particular about so sovereignty and much less what you're saying but about uh sovereignty and financial stability. Now fability is really the key word. Uh but based on felicious analysis maybe sometimes uh about the and and the because re regulation cannot by itself uh make makes really comprehensive strategy. It's it's a pillar. It's really important but can be uh build compressive strategy and I think and the best example is retail CBDC the euro the dario that is partly useless and costly uh and I don't speak about the world CBDC that is important but the retail retail CBC it's really a question and so now we have entered a new uh a new world a new uh kind of application of of crypto and blockchain application for for financial financial sector I think uh because before it could be considered as a scam or as a passing fail but now uh it's really implementing banks and other institution find that really uh as a concrete example and so we need really to implement the digital technology in in the the current universe

maybe just one detail on on this is Why? There is a e- money token regulation that doesn't follow just the e-oney directive that already existed. If I'm correct, you already had issued your token as the e- money uh using the directive that already existed. Why there has been a new regime?

Yeah, this is really good question. So for 26 years, Europe has had eony legislation which is basically regulating a digital version of CAS. a very good regulation and we when we started we saw okay this is really good for controlling um uh stable coins and we thought that this would be the foundation for that and it turns out to be Mika doesn't add anything uh [clears throat] to that legislation and it makes it worse now if we think about it uh then if if if you're an issuer if you're a stable coin issuer you have two main responsibilities is you issue at par and you redeem at par. You have to do it in a secure and safe way. That's the important thing.

The e- money legislation from you know 20 introduced 26 years ago basically says well you have to have it in segregated accounts. You can hold it in high quality liquid assets. That is the credit risk part. Really good. We welcome that.

That's good for the consumer. It's good for competition. Okay. What Mika did was that they [clears throat] fragmented this legislation because of technology. Hold on a second.

E- money legislation was supposed to be technically neutral and that's really important. But they wanted to kill stable coins. So they invented a new u set of of rules by introducing fractional reserves banks in between. uh you have to hold 30 to 60% of the underlying safeguarded assets in banks. You are you are making it less safe for the consumer.

And why is that? Because these are risky institutions. And not only that, when you have, and I'm not saying if, I'm saying when you have a next banking crisis, then that will spill over to the tokenization of stable coins. it will spill over to to stable coins. Now compare that to the US or the UK as it is proposed now then that is not the case.

In the US you can hold the underlying in high quality liquid assets that is treasury and uh if there's a banking crisis in the US it will not spill over if you hold it in in in treasury. So the what the regulation did was it was it introduced systemic risk into this market. So all claims that this is about making sure that there is less financial uh less financial instability is not true actually. That's one thing. Another thing which is really important [clears throat] is that it you you have to issue a par and you have to redeem a par and immediately.

So you have to be able to give the consumer their euro when they ask for it immediately. Okay. So how is that? Um in the US there is a there is a possibility of repoing the highquality liquid asset meaning that in times of stress you can basically say well the underlying assets are here in high quality liquid assets I need to redeem now and I need to borrow against you know qualified collateral and that is how you maintain and secure liquidity. How is it in Europe?

Well, that was really interesting. In January 2025, the European Central Bank made a decision publicly saying that non-bank authorized and licensed stable coin issuers will not have access to the central bank. Okay? Will not have access to the central bank. Okay.

Why is that? Well, they provide the explanation as well. And what was the explanation? The explanation was well if we would allow stable coin issuers to have access like we allow banks to have access then there would be too little difference between stable coins which are then synthetic CPDC's and what we the central bank are going to issue in 2029. Imagine that you have a European central bank which has the main objective of of making sure that there is financial stability.

They publicly claim that they don't want to allow licensed and authorized stable coins to have access to the central bank because it will make the product almost as safe as central bank money. This is really really interesting and I think honestly that the Europeans should ask themselves is this what we want? In the end of the day, the European Central Bank is supposed to serve the people of Europe. But the European Central Bank has decided basically to go out and compete in this market, offer a digital euro, competing with the um private initiative in Europe. And because of that, they are also now not only overseeing this market, they are creating rules and regulation to make it easier to compete.

this is really not okay and I think honestly that people of Europe should you know uh voice their opinion about this that's all good points um Julia you want to to add something on this or maybe to discuss we have seen what's the current state of of Mika and regulation what should be the next step in your view

yeah know perhaps just to to react quickly and then we can talk about the next step of course I'm not working for the ECB so perhaps you are better position question Xavier to to answer on on your point John but yeah agree with you in the sense that Mika was created at least the stable coin provision [clears throat] were created uh in reaction of something that disappeared which is which was Libra uh so we built that on the fear of this project totally true uh regarding the eman directive I mean it is based on eman directive but with stronger rules applied to to DT of course uh whether these rules should be uh revised I mean yeah perhaps we should work on that and perhaps in the next negotiation we're going to have something I don't know but in any case um we need and agree with you to to to check what happened elsewhere it should be this benchmark exercise should be at the hurt of what we are doing in in Europe uh and not only the genius act but of course genius act is is is one of them. uh regarding the next step um yes I think next step now it's would be about of of course issuance we talk about we talk about it it's an an important step to when actually you want to regulate but now we've got Mika uh since uh it has it has applied since June 2024 for stable coins for asset preference token and e- money tokens and December 2024 for crypto asset service provider I think issuer are heavily regulated So perhaps we don't need more regulation at the issuer let's say level but no I would say that emerging risk are increasingly um downstream if I may say so to distribution uh I would say to the distribution level uh and this is where I would um and phase I would say the next step of regulation it's at the distribution phase um because what we see Here it's new types of risk. I would say it's at the level of the access at the level of the the marketing and the reuse also of the stable coin. I mean that uh access because now the crypto asset service provider are becoming the kind of gatekeeper in in the market. Uh so they are listing stable coins and they are providing stable coin to to the retail client.

So the distribution part here is super interesting and we're going to talk about it later on but we published a statement uh in January 2025 at ESMA regarding unauorized stable coins and so stable coins that are not compliant with the Mika rules and gatekeep and actually sorry not gatekeeper crypto asset service provider which are gatekeeper play an important role on uh which one they can actually um make available to the EU clients. You've got also the way you market it. The way actually cast present it. Uh and here you've got we've got some risk. For example, one of them is you know the mislabeling uh thing when it comes to tokenization.

We have seen some product uh named labeled uh tokenized securities. Well actually it was definitely not a securities. It was more derivative product of this kind of thing. So it is an issue linked to distribution channel and by reuse I mean you know when crypto service provider provides stable coins but provide also this kind of stable coin products with yield uh linked to defy protocols and here we've got also I would say an issue uh because uh as you know it's impossible to have any kind of interest uh at the issuer level but also at the intermediary level but then you enter into a gray area when it comes to DeFi and we need at least clarity on that. Uh I don't say that we need to uh actually make it impossible uh or forbidden that not at all but we need clarity.

Um it's it's I think it's key. Uh so yeah so the distribution channel is a is a very important one and I would say this is the uh I would say the I would prioritize this this part now uh instead of the issuance part and there is another point also uh that goes with distribution by the way it's enforcement uh because by nature I mean all these tokens and stable coins also are cross border by nature you can issue stable coin in in Germany and you can trade the the stable coin in France and you can have some put them on defy protocol etc etc so rules regulation is great but mindset is also important and corporation is also super important that's what we call supervisory convergence in uh in actually for for the European authority at the European authority level so we need actually to um face the problem that we have a European regulation but what we've got 27 other member states 27 other countries we have their own view sometimes on how to apply the rules and here we need to to work on that and escali is helping uh to have a more let's say harmonized approach when it comes to to to enforcement. So yeah so I would say that indeed we've got a regulation definitely this regulation is not perfect agree with you but regulation is not old we need mindset also and we see we see that in the US uh because a lot of project crypto projects stable coin project develop in the US under the Biden administration where actually nothing was clear nothing and the ECC the CCC it was possible for them to knock knock not knock knock knock at the at your doors and and say oh by the way your your thing your crypto thing is a security at any moment but it did not prevent actually development of a market. So here in Europe we should also let's say have this kind of mindset and we we need to make it possible for the private sector to develop uh projects on stable coin on on crypto in general. Um yeah that's

yeah I I agree Julian of course uh legal clarity is really important. Europe pioneered that. That's a good thing. That's very positive. We just have to realize that we can improve.

Uh we see the global market how it has been progressing and the title of this panel is balancing consumer protection and global competitiveness through regulation. I think I think there's a huge opportunity in Europe to improve Mika in a way that we are better than the US. Okay? Because if we get that right and we make sure that we have the safest and the best product for the consumer, we are better enabled to compete with the US dollar. Okay, the US dollar is 99.

7% of the US dollar stable coins. We want to change that but we cannot do that if we have a regulation that doesn't adapt. So we have to just change it. we have to uh improve it and then we need institutions that trust the 400 million people of Europe because in Europe you have fantastic companies, you have many fantastic entrepreneurs, trust the private sector to innovate in technology and business. Okay, back those entrepreneurs up with what is needed by the institutions of Europe to enable them to compete with the rest of the world.

Don't fall in the um trap to think that there is a centralized planning that's going to solve all of this. It's not in my mind. I mean I used to be the chairman of the supervisory board of the central bank. It's not a role of a central bank to innovate in technology and business and so on. Back those companies the private sector up to do it out of Europe and enable them to compete.

That is my message. Yes, may maybe just to react but what what I said just before really Mik was really the first step because it's just a reaction of Lima and as you said Julian it's really the first step but be we could not have anything but it was just the first verte was a result of a compromise or with among all all defense parts uh and I clearly see what you're referring to about 30% of deposit in in banks and and so on. Yes, it was a compromise. Uh it was an equilibrium really to to embark and really to to join all the the bank lobby and all the banking system to to propose this and I agree that it's it's not it's not perfect and we can improve this and really the first step and maybe just to to to tackle the the effect of of stable coin on banks is totally ambiguous. It's not clear because when you look at deposit, credit or financial transformation, it's totally uh it's unclear.

It depends on if you are a retailer or international for what who claims the stable coin, what are the assets that are convert when you you are you claim stable coins and uh how you manage all your reserves. U maybe banks are afraid about about this but it's not it's not clear there's not u eventually a leak of of deposit depends uh and we have the same debate about the mmfs in the 70s what what will be the impact on deposit uh so uh the the the compromise will progress maybe we'll can get we'll get something new uh but I totally agree that it's really a huge opportunity before Europe we have we are profitable a huge massive market compared to to the US we can compete with them we have a profound market with Africa for instance for remittance for instance and we can we can re really level up our our level so so yes so maybe the regression is is will improve in the coming years and uh and there is a huge huge potential for for banks

that's a very interesting take I think so so because you don't see it as necessarily a threat but but maybe an opportunity. What interests me is maybe where do you see banks play the best their strengths because every company is trying to do everything but at the end there is something you do better. So you think that banks especially have experience with dealing with customers and and so on. So maybe they would be able to provide better services and so on or more being a financial actor or like in the sort of second tier providing services to stable coin issuance on how you see more opportunities. Yeah, I I think there will be a move of unbundling of banking services or or changing of services because for for banks there is really an association of payments all banking services and now on the payment leg uh it it's different and much more complicated there will be an evolution for instance about payment uh I think banks can compete for at the national level we've seen with weo and so on for for the French on European point of view there no uh so so much difference uh between the stable co or not for for the customer it's fast it's relable and so on so there's no really a massive difference there is a basic difference for cross payment remington and so on to really streamline the process and ch less costly faster and so on so uh pens can in integrate much more this part of remittance and all the part of settlement and financial markets uh there is a nearly a massive change to to to uh and to to implement.

So it's really a major change for for them. Uh but I think uh banks will play uh a significant role even with stable coin and even for for deposit even if [snorts] um stable consurers will put the money in HQA and and all the funds. uh with the regulation [snorts] there is a limited part to to put in in deposit but it it imposed to to banks to change their banking management and cash management uh because we have much more concentration of stable issuers. So uh for for manage for for managing deposits it will be uh much more complicated uh with part of unsecure deposit. So how do you you deal with this and for the leaking of of a part of the of deposit uh how to find new uh capital market insurance to to uh channel to credit offer?

So it's it's all also a challenge. So just to return to your question, I think banks will still uh remain the cornerstone of the relationship between retailers and the financial market and all the all the system but but we need to uh improve uh our uh and to develop our game improve our system and to to really adapt to uh the new newcomers and new new stable systems.

I see you're reacting internally a lot. [clears throat] Um so the what we very often hear about stable coin is that well in Europe it's you know already fast and cheap and everything. We we you know there is not much to add but [laughter] Monerian was the first company as I told you uh that issued a licensed and authorized stable coin and the number one reason why we wanted to do it. There was just one reason in my mind. We wanted to be able to hold the money outside of the banking system in a legal and authorized way.

So we wanted to create an alternative to the banks. Okay, if you think about why are stable coins so popular today, it's partly because of cross border payments. It's cheap and easy and so on, but mostly in Latam and Africa and so on, it's because people can hold the US dollar in their wallet and they don't need a bank account. So those people have the same motive as I had. I wanted to be able I come from a country where the whole financial banking system collapsed.

Okay. I wanted to be independent of that and imagine what kind of a change that is. What I want to focus on is that there is a huge potential to improve the financial system. It doesn't mean that you are uh competing with the banks but you are you you are uh providing an alternative and you can provide a safer system financially safer system and I think it's about the mindset of people you can react to some new technology and say we have to kill it that was you know what was done initially here in Europe where we can say well this is interesting we can we can prop pro potentially improve something how can we do it and I think there is a huge potential still to improve the financial system the banking system and so on using this technology and I think the regulators and the ECP and so on they have to maybe adjust their thinking in that sense that you know this is a big opportunity but it it might require that we do things differently than what we have been doing so far

just a minor remark yes I I agree that to to to keep your your money safe and and so on, but we cannot really compare the financial system of Leam and and Lebanon for extend you don't need to take your banker to to withdraw your money. Uh but I I totally agree that it's another possibility to to really keep safe your your money and to have another approach and mindset about about financial system. So I agree.

Yeah. the so what I'm saying is that um banks are obviously um concerned that there will be a flight out of deposit bank deposits I understand that but for the consumer well they are subsiding lending uh for the banks that's not optimal for the consumer so the consumer can now via stable coin they can say okay I have a stable coin and now I want to basically place that into a money market fund money market funds were fought. I mean they the banks didn't like money market funds in 1971. They wanted to ban it because it was supposed to be you know destabilizing for the banking sector. Yes, because it's basically a threat to the the deposit.

The same thing is for the stable coin. But it doesn't mean that it's bad. You know it's competition. And competition in my mind is healthy just like competition between jurisdictions.

So talking about uh competition between jurisdiction, what do you think Julia should be done in Europe regarding non-Euro stable coin? Because I know that there is US issuers that have also issuance in Europe. There is totally foreign stable coin that are going on. So like what what should be the strategy regarding this because we can only regulate where we are.

No, no, sure. Um, but I mean the position is quite clear in Europe. I mean you need to play by the rules. So if you can't comply with the the Mika regulation then it it it's impossible for you to actually have EU clients and to target the IU EU clients and this for several reasons. So we as I mentioned before we issue a statement that is very clear that crypto asset service provider it's impossible for them to offer to market non uh not even non-EU stable coin an EU stable coin is not the problem the problem is non-compliance stable coin can come from anywhere in the world but you need to be to comply with Mika you need to play by the rule so the the the crypto service provider they it's impossible for them to market to to to trade or even to execute or to offer to their client non-complent stable coins.

I mean here we we need to recon reconcile actually to let's say mindset to um to problem we've got we need to protect ourself protect ourself as European against the Asia money of the dollars uh against the USDT for example because there is at stake and it's not ESMA saying it it's the ECB it's it's the BIS there is a monetary sovereignty risk and we need to take that into account of course and we need also to think about the role full of the of the euro. So I prefer your actually that your clients held um I mean euro stable coins than US stable coins of course even it's the the stake of the market is is very I mean it's not impossible to compare the two but anyway so we need to think about that we need to have that in mind and we have also to reconcile this with competitiveness we need actually to make it possible for our European company to develop their business model as you mentioned before uh we need that because otherwise we're going to have a situation where regulated entity EU entities will uh bear the cost if I may say so of the regulation while actually third party company or company coming from abroad will you know uh I mean benefit from from the scale without um being um let's say compliant with MIA so it's not this situation is not possible that's why actually for non-compliant stable coin uh it should be impossible to market them or to offer them uh in Europe I mean it's it's quite clear But we also need to work on the fact that we need um in Europe to have as much as possible uh let's say uh a kind of web of European companies that can actually scale that can propose that business model to the European consumer because my view is that uh the best way to protect uh EU consumer but even to protect uh and of you mentioned it before the the EU market EU market system is to have European companies. Um so yeah

so that's a great ambition but I we still see that there's a deficit. So maybe in one sentence each of you what should be the one priority we should have uh in the next month and years to help that happen in in your view

uh clarity regulation clarity and maybe much power for ESMA and to have really one point of entry and really clarity for for competitiveness is clear as I said before there is a regulation and regulation and customer protection will be the basis of innovation and the development of the market and and really creates [clears throat] trust. So yes, regulation

more than one sentence but okay one sentence I think we need to weaponize the private market in Europe by the right regulation. We have to revise the current regulation and then we need the institutions to back it up.

Okay. And for you Julia

uh simplicity for firms uh clarity for EU consumer I would say and supervisor conversion so harmonization of the practice in Europe.

Great thank you very much for for for this. Thank you. Thank you for the audience.

Thank you.