The European Central Bank (ECB) and the European Commission are drawing battle lines over the strength of landmark rules governing cryptocurrencies, specifically whether they can withstand the potential impact of Donald Trump’s policies.

The ECB thinks the U.S. president’s lavish support for the American crypto sector risks causing financial “contagion” that could blow up the European economy, according to a policy paper seen by POLITICO.

But in a rebuff, the Commission dismissed the Bank’s alarmist analysis, signaling that it had misunderstood the EU’s own rules, and hit back at what it saw as an unwelcome intrusion into lawmaking.

Meanwhile, the argument sheds light on how jittery financial policymakers generally are about moves by the Trump administration to “expand the reach of the dollar” through complex financial technology.

European officials fret that several major financial market reforms the U.S president has touted will undermine efforts to become strategically independent as the EU tries to revamp its financial sector. They worry it will prompt a flight of assets to the U.S. and introduce new risks into the system.

ECB And European Commission Clash Over MiCA Rules.

While the ECB calls for tighter controls, the European Commission dismissed the warnings as exaggerated, per the report.

This specific clash is about the Markets in Crypto Asset Regulation (MiCA), a landmark law passed in 2023. It was heralded as the first regulation worldwide to introduce strong safeguards and consumer protections for cryptocurrency firms.

Cryptocurrencies – digital currencies bought, sold, and traded online – appear poised for a resurgence under Trump, following the industry’s multi-billion dollar investment in his election campaign.

However, at the heart of the recent scuffle is anxiety regarding a popular type of cryptocurrency known as a “stablecoin,” which emulates the stability of major currencies like the dollar and the euro, unlike more volatile cryptocurrencies like Bitcoin.

Many stablecoins are dollar-denominated, and people in some countries already use them as a reliable alternative to the US dollar when local currencies are unstable. Governments fear these coins could replace traditional money, undermining national sovereignty and leaving citizens vulnerable to the fortunes of businesses prone to disastrous meltdowns.