The head of the US’s Commodity Futures Trading Commission (CFTC), Christopher Giancarlo, said the EU’s plans on oversight clearing houses was “completely irresponsible” and would be met with retaliation.
Clearing houses are financial institutions that are meant to ease the exchange of various transactions.
He said: “These are blunt and strong tools.
“None of these options represent a course of action that I wish to pursue.”
These threats came as the UK attempts to ease tensions with the EU over the movement of money between bank accounts as Brexit day draws closer.
Mr Giancarlo warned the CFTC would take its own action if there was no resolution.
This could include barring the EU from US financial institutions like the Chicago Mercantile Exchange (CME).
The CME is used by many banks around the world to invest their currency into dollars and US Treasuries.
This could also see the US barred from EU institutions like the Deutsch Borse’s Eurex that trades futures tied to the prices of German government bonds.
Clearing houses are at the heart of the global market’s stability and have become a war zone between various authorities.
Financial markets depend on clearing houses as they help to manage if either side of a contract ends up defaulting.
London is currently the centre for trading and clearing contracts, which include around 90 percent of euro-denominated trades.
Due to the UK’s departure from the EU, the EU wants to give their regulators the ability to oversee London’s financial facilitators.
Member states are divided over the potential implications of the oversight as the European Commission’s reforms make their way through the legislative pipeline.
Both the UK and US have opposed the oversight and have suggested using local regulators with close cooperation.
While there has been little progress in negotiations, the US has added pressure due to the possibility of what it might mean for non-EU clearing houses.
The threats made by Mr Giancarlo are one of many that have become a pattern in US-EU talks with both sides threatening major consequences, but always resolving things on good terms.
Mr Giancarlo has continually argued for the EU to revise its plans, going as far as to call them “wholly unacceptable”, as they could potentially apply to the US markets.
He said that anyone participating in the US market would face a “completely untenable position of having to choose between violating domestic laws and regulations or violating foreign laws and regulations.”