Odaily Frontline | European Central Bank Report: Stablecoins may pose a threat to EU market integration and interoperability
This article comes fromCryptonews, Original Author: Sead Fadilpašić
Odaily Translator |
Odaily Translator |
Two of the three potential stablecoin proposals could lead to concerns about EU market integration and interoperability, as well as risks to financial stability, affecting the security and efficiency of the payment system, the European Central Bank (ECB) said. .
In a recent report, the European Central Bank’s Crypto Assets Task Force (ECB Crypto Assets Task Force) stated that stablecoins may fall outside the scope of the Single Euro Payments Area (SEPA) regulation – “the regulatory Harmonizes cashless euro payments across Europe and provides for interoperability."
Stablecoin initiatives such as Facebook's Libra could lead to pan-European coverage, but pan-European accessibility (the ability to make payments to all consumers at the national and EU level under the same conditions) may require "deliberative efforts," the report said. ".
Additionally, if multiple stablecoin protocols exist, this situation could lead to fragmentation of the protocol network. "From a demand-side perspective, users may face a trade-off between convenience and additional costs (such as out-of-pocket and other fees, idle balances) and barriers to switching.
The report states that the task force aims to assess the impact of stablecoins on the euro area based on the use of three stablecoins:
1. As a crypto-asset auxiliary function, it allows to secure the income of crypto-assets in less stable assets without breaking away from the crypto-ecosystem;
2. As a new payment method;
3. As an alternative store of value.
The first scenario, described as "merely a continuation of current market conditions", has so far not raised any concerns from the financial sector or central banks.
On the other hand, "stablecoins envisioned in the second scenario may reach a scale of operation that creates vulnerabilities in the stablecoin protocol itself and its linkages to the financial system, which may lead to financial stability risks, or in other words— — financial stability risks could become material, and the security and efficiency of payment systems could be affected.”
In the third scenario, "stablecoins collateralized by high-quality liquid assets (such as tokenized funds) may increase the demand for safe assets, which may affect asset price formation, collateral valuation, money market operation and currency policy space". The third scenario is the least plausible since collateralized stablecoin protocols are not exempt in a low interest rate environment - but is also the most relevant from a monetary policy perspective.
Even if this most unreasonable scenario plays out, "could have significant implications for monetary policy", euro deposits and cash "are still expected to be resilient to possible 'alternative stores of value'", the task force said.
However, in either the second or the third scenario, stablecoins are “likely to coexist with cash payment transactions.” The reasoning behind this, according to the report, is that “cash’s unique characteristics” are “in physical form,” while stablecoins – at least in the short or medium term – are expected to primarily compete with other electronic means of payment.
The task force noted that "stablecoins may co-exist with euro banknotes even to the extent that they satisfy store-of-value needs"—a statement they claim would also apply to demand outside the eurozone, especially given those who do not trust People with their own currency or banking system who actually believe in an international currency in physical form and hold euros. "It's hard to imagine people storing the last of their assets in digital form under these circumstances.
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