The new £1 pound coin is seen alongside US dollar bills and euro coins | Matt Cardy/Getty Images Brussels makes euro clearing a Brexit battleground European Commission wants to strip London of a business worth nearly €1 trillion a day.

The European Commission demonstrated on Tuesday that it has the power to inflict real economic pain on the U.K. as a consequence of its decision to leave the EU.

The EU’s executive arm forged ahead with a proposal feared by many in the City of London on so-called euro clearing, which will cost banks an estimated £63 billion and could deprive the U.K. of 83,000 jobs.

The new proposals empower the Commission to strip London of its nearly €1 trillion-a-day euro-clearing business if it deems it necessary for financial soundness in the EU.

The bulk of euro-denominated derivatives transactions are cleared at clearing houses in Britain. EU regulators — including the European Central Bank — are concerned they will no longer have oversight of key transactions in their currency after Brexit takes effect.

Clearing houses are a key part of the financial plumbing that was beefed up after the 2008 market crash to manage the risk inherent in some types of financial transactions. They act as intermediaries between two sides of a trade by taking a down-payment from parties in case they go bust before the trade is completed.

Their usage became mandatory for certain financial trades following the crash, with the sole aim of preventing another bank-led economic implosion.

Under the Commission’s new proposals, if a clearing house poses economic risks to the EU, its entire business model may be forced to change. So if the firm wants to continue to attract European clients, Brussels is insisting that it be subject to EU rules.

Most importantly, the Commission also gets to decide whether the clearing house must relocate into the eurozone, allowing watchdogs to more closely keep an eye on what’s happening with their currency. The Commission is backing views from EU regulators — including the European Central Bank — that any firm dealing with large volumes of transactions in euros should be positioned in the bloc.

Valdis Dombrovskis, Commission vice president for financial services, justified the decision.

“The purpose of our legislative proposal is to ensure financial stability and not moving business for the sake of moving business,” he said. “This is why we are not putting forward some kind of generalized location requirements but rather empowering the relevant authorities.”

The proposals will now be discussed by the European Parliament and member countries. One Council of the EU source told POLITICO the matter could be raised under the Maltese presidency, meaning talks could begin as early as over the next couple of weeks.

Unsurprisingly, the London Stock Exchange Group, which houses clearing giant LCH and stands to lose a huge chunk of business, is warning of disastrous knock-on effects if euro clearing leaves London. The banks also oppose the move on the grounds that it will increase costs and lead to unintended consequences that would threaten financial stability.

"This kind of currency nationalism is likely to lead to less competition, higher costs and market fragmentation," said Miles Celic, CEO of TheCityUK, a financial industry lobbying group.

Both sides may argue that their position is the more financially stable but ultimately, the economic and political prize may prove too tempting for Brussels to give up in the Brexit talks.