The European Central Bank calls for proactive regulation of stable coins

In a recently published comprehensive report on global stable coins, the The European Central Bank (ECB) pushed for the establishment of clear regulatory parameters for the establishment of stable coins, citing risks and gaps in the applicable regulations.

“To take advantage of the potential benefits of global barn coins, a solid legal framework to deal with these risks must be put in place before such agreements can take effect,” the ECB wrote in its May 5 report.

Deep diving has potential, but is not without risks.

The ECB report highlighted various advantages of stable international currencies, including speed and simplicity that the public considers important..

The European Central Bank calls for proactive regulation of stable coins
The European Central Bank calls for proactive regulation of stable coins

However The government bank has not failed to detail the various possible risks and difficulties with this type of currency, including issues of stability, value and possible system failure. One of the specific risks is that users cannot capture their exact “stable” value if the asset loses its fixed value. or if your support deviates from an expected level. As stated in the report:

“Given the promise of a ‘stable’ value and the ability to convert currency holdings back into fiat currencies at any time, there is a risk that end users will consider stablecoin equivalent to a deposit.”

One size fits all may not be the best approach

In The report also looked at the issue of regulation. Rimless stable coins may or may not fit into existing government frameworks.

Depending on the type Stablecoins can derive their value from various sources, including primary financial assets, crypto assets, and fiat currencies, which makes regulatory waters unclear. Some stablecoins may even fall into the investment category rather than a stable source of value. The ECB said:

“Given the complexity of its structure, a stable coin arrangement, depending on its specific design features, could fall within one of several different legal frameworks, or possibly none of them.”

In its report, the ECB also examined Facebook’s scales and linked different numbers and metrics to different scenarios.

Although the ECB called for clarity on regulation, the Board also mentioned the need for a comprehensive approach. “In order to take advantage of its potential benefits without compromising financial stability, we need to ensure that stable currency transactions do not work in a regulatory vacuum,” the ECB concluded.

The digital currencies issued by the central bank, a classification of stable coins, have also made numerous headlines in the past few weeksAs countries hurry to find the best approach to digital transition.

Cointelegraph contacted the ECB for further details, but received no response until the date of publication. This article will be updated accordingly when a response is received.

Do not stop reading:

Similar Posts