- European Central Bank (ECB) in their recent report of September said the term ‘stablecoin’ to be potentially misleading
- Eurozone’s primary financial institute mentioned that stablecoins if and when properly designed and appropriately regulated
- President Christine Lagarde in a speech, said that ECB is working in the direction to compliment fiat currency with the digital euro
European Central Bank (ECB) in their recent report of September said the term ‘stablecoin’ to be potentially misleading. They also mentioned that it should be replaced with another word that is practically less confusing. The 30-page report Stablecoin: Implications for monetary policy, financial stability, market infrastructure and payments, and banking supervision in the Euro area talks about how stablecoins is lacking infrastructure, and how it is different from the existing fiat currencies. The paper released by ECB Crypto-Asset Task Force, mentioned stablecoins as a crypto-asset, as a new payment system and whether it can be an alternative store of value in long term effect.
Stablecoins, simply put, is cryptocurrency whose value is pegged to another asset. These pegged assets often range from fiat currencies like United States Dollar, other cryptocurrencies, valuable metals or even to the combination of all. They also tend to have minimum price fluctuations.
ECB Report on Stablecoins
Eurozone’s primary financial institute mentioned that stablecoins if and when properly designed and appropriately regulated. They have the potential to justify their name, something that lacks in them currently as the phrase goes by stablecoin, but price still fluctuates. ECB acknowledged that rock bottom interests for the foreseeable future might have removed incentives for the users. But that even doesn’t justify the name, and misleading of users is still a likely scenario.
ECB emphasised when regulatory principles and other approaches will be defined the term stablecoin shall be replaced, which shifts the emphasis and doesn’t project stability as a promise in the terminology. They even suggested that unambiguous phrasing that will distinguish them from fiat currencies.
ECB’s Interest Towards Benefits of Digital Currency
President Christine Lagarde in a speech, said that ECB is working in the direction to compliment fiat currency with the digital euro. The central bank digital currency will also serve as an alternative to private digital currencies, like stablecoins, Lagarde added, continuing her speech. Lagarde concluded that CBDC might be promoted, but the sovereign money will remain as the core of the European payment system. This comment came from the fact the Europe where cryptocurrency is widely spread, digital currency have the potential to cause a shift from fiat to crypto.