ECB: Digital Euro Is Crucial for Europe's Autonomy

DEMOCRATIC BACKING NEEDED TO PASS

Source: Reuters

The UK's approach to regulating stablecoins is now under review as the House of Lords Financial Services Regulation Committee initiates a formal inquiry. The committee is seeking public and expert input on the proposed regulatory frameworks drafted by the Bank of England (BoE) and the Financial Conduct Authority (FCA).

Baroness Noakes, the committee's chair, stated the goal is to determine if these proposals are "measured and proportionate" responses to the evolving stablecoin market. The inquiry will also explore the potential impact of stablecoins on traditional financial services like banking and payments, weighing the opportunities against the risks of their increasing adoption in the UK.

Industry participants, experts, and the public have until March 11 to provide written submissions. The committee is also set to hear oral evidence in a public session this Wednesday.

Inside the Bank of England's Proposed Framework

This parliamentary inquiry coincides with ongoing efforts by UK authorities to establish clear oversight for digital assets. The Bank of England has made developing a framework for "systemic stablecoins" a priority, aiming to finalize its approach by the end of the year.

Sasha Mills, the BoE's Executive Director for Financial Market Infrastructure, highlighted that these initiatives are crucial for shaping the future of digital finance in the UK. The central bank's proposed regime for systemic stablecoins includes several key features:

• Central Bank Access: Issuers of systemic stablecoins could hold a deposit account directly with the Bank of England.

• Liquidity Support: A potential liquidity facility would act as a backstop for stablecoin issuers.

• Backing Requirements: Stablecoins would need to be backed by a specific asset mix: 60% in short-term UK government bonds and 40% in Bank of England deposits.

• Holding Limits: To manage risk, temporary holding limits are proposed at £20,000 for individuals and £10 million for businesses.

The BoE defines "systemic stablecoins" as fiat-pegged tokens, particularly those denominated in pound sterling, that are widely used for retail or corporate payments within the UK and could pose a risk to financial stability.

Currently, popular stablecoins like USDC and USDT, which are primarily used for crypto trading, are not classified as regulated payment instruments in the UK. However, this is expected to change under the new regime, with full implementation targeted for October 2027.

How the UK Stacks Up: US Regulation vs. China's Ban

The UK's regulatory efforts are developing against a backdrop of starkly different international approaches to stablecoins.

The US Approach: Legislating Guardrails

In the United States, the GENIUS Act, signed in 2025, provides a clear regulatory path. The law mandates that stablecoins must be backed one-for-one by US dollars or equivalent high-quality liquid assets, such as short-term Treasury bills. Issuers are also subject to US banking and anti-money-laundering regulations. Regulators are expected to release detailed implementation rules under the CLARITY Act by mid-2026.

China's Stance: A Complete Prohibition

In contrast, mainland China maintains a strict ban on all cryptocurrency-related activities. In December, Chinese authorities reiterated that any business involving virtual currencies, including stablecoins, is considered an illegal financial operation. The government views them as a risk to monetary sovereignty, citing concerns about money laundering and uncontrolled cross-border capital flows. Instead of allowing private stablecoins, China is focusing its financial innovation efforts on its central bank digital currency, the digital yuan (e-CNY).

President Donald Trump announced a major policy shift regarding travel and airspace over Venezuela.

President Donald Trump announced on Thursday that the U.S. will reopen all commercial airspace over Venezuela, clearing the way for American citizens to travel to the country. The president said he informed Venezuela's acting President Delcy Rodríguez of the decision.

Trump stated he directed Transportation Secretary Sean Duffy and military officials to implement the change by the end of the day. "American citizens will be very shortly able to go to Venezuela, and they'll be safe there," he added.

As of the announcement, the Venezuelan government had not issued a public comment.

Diplomatic Thaw: US Signals Intent to Reopen Embassy

This move follows earlier signals that the U.S. is exploring a restoration of relations with the South American nation. Earlier this week, the Trump administration notified Congress of its first steps toward possibly reopening the U.S. Embassy in Venezuela, which was shuttered after diplomatic relations collapsed in 2019. The move comes after a U.S. military raid that ousted then-President Nicolás Maduro.

In letters to 10 congressional committees, the State Department detailed its plan to send a growing number of temporary staff to perform "select" diplomatic functions. "We are writing to notify the committee of the Department of State's intent to implement a phased approach to potentially resume Embassy Caracas operations," the department stated.

Conflicting Signals: "Do Not Travel" Warning Persists

Despite the president's announcement encouraging travel, the State Department's official advisory for Venezuela remains at its highest level: "Do not travel." The department has not yet responded to inquiries about whether this warning will be updated.

The current advisory cautions that Americans face a high risk of wrongful detention, torture, kidnapping, and other dangers. When diplomatic ties broke down in 2019, the State Department strongly warned U.S. citizens against traveling to Venezuela.

Background on the Airspace Closure

The decision to reopen the airspace reverses a policy implemented in November. As part of a pressure campaign against the Maduro government, Trump declared that the airspace "above and surrounding" Venezuela was to be considered "closed in its entirety."

Following that declaration, the U.S. Federal Aviation Administration (FAA) issued a warning to pilots about heightened military activity in the region. In response, international airlines began canceling their flights to Venezuela.

American Airlines Plans Return to Venezuela

Responding quickly to the news, American Airlines announced on Thursday its intent to reinstate nonstop service from the U.S. to Venezuela in the coming months. The carrier was the last U.S. airline flying to the country before it suspended service in March 2019.

"We have a more than 30-year history connecting Venezolanos to the U.S., and we are ready to renew that incredible relationship," said Nat Pieper, American's chief commercial officer. "By restarting service to Venezuela, American will offer customers the opportunity to reunite with families and create new business and commerce with the United States."

The airline stated that it will share more details about its return to service as it works with federal authorities to complete security assessments and obtain the necessary permissions.

Venezuela is advancing a revised oil reform bill designed to slash fiscal burdens on energy companies, a strategic move aimed at attracting private capital back to its crippled oil industry. A new draft, set for discussion and a potential final vote this week, grants officials significant flexibility to adjust taxes and royalties.

The government's proposal comes as it navigates intense pressure from Washington and seeks to reopen its energy sector to foreign oil firms.

Overhauling the Tax and Royalty System

The draft legislation introduces major changes to how Venezuela taxes oil production, moving away from a rigid system to a more adaptive framework.

Key fiscal adjustments in the bill include:

• A New Hydrocarbons Tax: The existing extraction tax would be replaced by an "integral" hydrocarbons tax of up to 15% on gross production, with no deductions permitted.

• Flexible Royalty Rates: Royalties would be capped at 30% but are no longer fixed by law. This change empowers the Oil Ministry to modify the rates based on a project's specific economic conditions, capital intensity, and development phase.

• Potential Income Tax Cuts: The bill proposes allowing the ministry to lower the hydrocarbons income tax rate to ensure projects remain profitable. However, some legal experts note this could conflict with constitutional limits on tax authority.

Venezuela's Oil Ministry did not immediately respond to requests for comment on the bill's details.

Addressing Key Investor Risks

Beyond fiscal incentives, the revised bill aims to ease legal and commercial restrictions that have previously deterred investors.

The new draft removes language that had confined dispute resolution to "independent" arbitration, potentially opening the door for more widely accepted arbitration mechanisms outside Venezuela.

Furthermore, the legislation would permit private companies to sell their share of crude oil output at market prices, provided their sales plans receive ministry approval.

The Political and Sanctions Backdrop

The reform effort is being championed by acting President Delcy Rodríguez but faces criticism from multiple sides. Some of her political allies in Venezuela view the plan as a betrayal of nationalist principles. Meanwhile, international legal experts argue that earlier drafts failed to provide sufficient safeguards for investors.

The entire initiative is unfolding under the shadow of US sanctions. The Trump administration continues to impose oil sanctions on Venezuela, creating a high-risk environment for international firms.

Currently, Chevron Corp. is the only company with a US connection that holds a license from the Treasury Department to produce oil in the country. Many other companies are waiting for authorization to either resume their previous work or launch new upstream operations.

A first draft of the bill was approved on January 22, with a second and final vote potentially occurring as soon as Thursday.

Bitcoin experienced a sharp drop during the U.S. trading session, falling below the $84,300 mark. The downturn mirrored a broader sell-off in precious metals, with both silver and gold declining by 8% to 12%. Against this backdrop of market volatility, key statements from President Trump and Treasury Secretary Bessent offered a glimpse into the economic strategies shaping the financial landscape.

Trump Signals New Economic Initiatives

President Trump unveiled several significant economic developments, focusing on energy, domestic industry, and monetary policy.

Venezuelan Oil and U.S. Industry

A major announcement involved U.S. oil companies expanding into Venezuela, a move Trump stated would generate wealth for both nations. He also noted that diplomatic dialogues successfully prevented the closure of Venezuelan airspace.

On the domestic front, Trump highlighted the strong performance of American automotive giants Ford and GM. He also celebrated a milestone in industrial output, stating that the U.S. now produces more steel than Japan. While hinting at the possibility of future tariff increases, he emphasized that the U.S. is approaching such measures with caution.

Pressure on the Federal Reserve

Trump voiced a clear desire for lower interest rates, calling for cuts of two or three percentage points. He added that an announcement for a new Federal Reserve chair is expected soon.

This comes as the Fed maintains its pause on rate reductions for the second consecutive time, following a halt in cuts during the final quarter of last year. With no changes anticipated in upcoming meetings, market watchers are also noting that current Fed Chair Powell’s term concludes by June.

Bessent Offers a Positive Economic Outlook

Treasury Secretary Bessent provided an optimistic counterpoint, forecasting a positive economic trajectory. He pointed to a downward trend in inflation indicators and projected that 2026 will be a pivotal year.

Bessent argued that the expected rise in Venezuelan oil production will directly benefit American consumers by lowering gasoline prices, providing a boost to the economy. He assured that the revenue from these oil sales would be directed to Venezuelan citizens.

While affirming the Federal Reserve's independence, Bessent stressed the importance of accountability in managing economic strategies. He also confirmed that the IRS has contingency plans ready in the event of any government shutdowns.

As these high-level discussions unfolded, the sharp decline in Bitcoin's price began to slow, suggesting a potential for temporary stability in a turbulent market. The intersection of cryptocurrency volatility and major U.S. economic policy shifts continues to define the key challenges and opportunities facing investors today.

Source: Yahoo Finance