September 27, Frankfurt. Mario Draghi, European Central Bank (ECB) president, states that he is of the opinion that cryptocurrencies and stablecoins are not designed to be an adequate replacement of money.
Having sent a letter addressed to Evan Kalli, a member of the European Parliament, he explained that both he and the ESCB (European System of Central Banks) have been keeping a close eye on cryptocurrencies as a whole. They’ve been keeping their fingers on the pulse of the Financial Sector’s innovation, focusing on crypto-assets and the new facet of it, stablecoins. They tried to determine the place of these new technologies within monetary policy, market infrastructures, financial stability, and payments.
Draghi notes their limited use, as these coins were not designed to be a substitute for a country’s monetary unit, like the USD or the Euro.
However, he stated that this statement might very likely change in the future, due to how technology constantly evolves and changes as time goes on. He cited Libra, a cryptocurrency developed by Facebook, as having the potential to be used widespread across the world from retail to wholesale.
Draghi stated that he and the ESCB are studying the opportunities and drawbacks of creating a digital version of the Euro, but he noted that the real issue isn’t with technological challenges, rather the utility of it. They are trying to determine whether it’s worth the costs to move to digital, or if it would just prove too impractical compared to conventional forms of money.
Stablecoins. Crypto but less volatile
Stablecoins show the next evolution within the cryptocurrency industry. It’s usually backed by large financial or technology firms, with a set bracket of assets associated with the currency. This enables the coin to be far less volatile in value, keeping relatively stable in comparison to things like Bitcoin, that can jump hundreds of Dollars up or down overnight.
While usually, the assets are centralized, it’s possible to create a decentralized group of assets via decentralized vaults, commodity holders, etc.
G7 financial holders and central bank governors have all agreed on meeting in July to discuss this new phase in crypto technology and their various concerns about the systems, its regulations, and possible policies before they put in any form of an initiative.
A member of ECB’s executive board, Benoit Coeure, explain that stablecoins could possibly lead to risks associated with things like countering financial terrorism and anti-money laundering.
Even so, he cites stablecoins as a natural outcome of the world’s relentless technological expansion, increased globalization, and the consumer simply wanting different things as the years go on.
He considers Libra a harsh wakeup calls for policymakers and central banking firms. It’s the new challenge of the 21st century, and these entities will have to think of a way to respond to it or be left in the dust.