European Central Bank President: Stablecoins are not stable, they will be regulated as payment systems
Editor's Note: This article comes fromBabbitt Information (ID: bitcoin8btc), compiled by: Wendy, released with permission.
Editor's Note: This article comes from
Babbitt Information (ID: bitcoin8btc)
Babbitt Information (ID: bitcoin8btc)
, compiled by: Wendy, released with permission.
Last week, in a letter to members of the European Parliament, ECB President Christine Lagarde spoke about stablecoins and Libra.
Lagarde believes that Facebook's social media attributes give it a strong competitive advantage in stablecoin development, and the combination of social media data and financial data will cause other operators to lose competitiveness.
She also mentioned that it is incorrect to call a stablecoin a stablecoin, because unlike the traditional financial system, it still cannot guarantee the value and security of assets in essence.
On the regulatory front, she noted that the ECB is planning to apply its payments system regulatory framework to stablecoins.
Before becoming president of the European Central Bank, Lagarde was the chairman of the International Monetary Fund (IMF) and has some knowledge of blockchain and digital currencies. She has called on central banks to consider issuing digital currencies and has suggested regulators use blockchain technology to catch criminals.
The following is the content of the letter released by Lagarde:
Dear Members of the European Parliament,
Thank you for your letter transmitted through Economic and Monetary Affairs Committee (ECON) Chair Irene Tinagli.
As I emphasized at the hearing of the Economic Committee of the European Parliament on 2 December 2019, the ECB is closely monitoring innovations in finance and payments and assessing the strengths and risks of innovative projects, including the Libra initiative.
The goal of stablecoin initiatives such as Libra is to address the shortcomings of cross-border payments by creating a new and independent payment ecosystem that does not rely on existing clearing and settlement processes. With this system, they aim to provide lower cost, more efficient payment solutions and promote financial inclusion. At the same time, as I noted in my presentation to the Economic Council, innovation (including stablecoins) will only be beneficial if the associated risks are mitigated through effective regulation and oversight.
One of the possible risks is that stablecoins could lead to high market concentration.
If entities managing stablecoins control large digital platforms, they can affect the level playing field by promoting their own solutions (potentially with a lock-in effect) and preventing other service providers or payment methods from entering their platforms. In addition, the potential combination of social media data and financial data may give stablecoin operators a strong competitive advantage and reduce market competitiveness. The European System of Central Bank has been monitoring this in the wider context of the entry of big tech companies into the European retail payments market.
If the stable asset program reaches a certain scale, if retail users adopt stable assets as an alternative to bank deposits, then there may be a considerable amount of retail funds moving from the banking system to non-bank entities. While stablecoins promise "stability" and the possibility of converting holdings into legal tender at any time, the value of stablecoins will primarily depend on their governance and risk management, as well as the value of the underlying asset or fund portfolio. Merely promising that the proceeds from the sale of stablecoins will be invested in low-risk financial instruments will not be enough to ensure their stability.
Christine Lagarde
