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You are here: Home / News / World / ECB Calls For Change Of The ‘Misleading’ Term ‘Stablecoins’
ECB Calls For Change Of The 'Misleading' Term 'Stablecoins'

ECB Calls For Change Of The ‘Misleading’ Term ‘Stablecoins’

September 23, 2020 by Sahana Kiran

Europe seems to be taking a keen interest in digital assets, specifically stablecoins. While the European Union has completely dissed the issuance of stablecoins. The European Central Bank [ECB] called for a change in the tag “stablecoins” as it reportedly doesn’t fit its characteristics.

Europe Probes Stablecoins

Cryptocurrencies have been touted as extremely volatile assets. However, for those who feared volatility of this sort, stablecoins came as a silver lining. While several authorities have wholeheartedly welcomed stablecoins, these assets continue to reside on the negative purview of a few. The European Central Bank [ECB] seems to be the latest member of the list following the release of a 30-page report.

In its report, the ECB highlighted how the term stablecoin could be “misleading” as it is quite often comprehended to have optimistic undertones. However, the ECB went on to call out stablecoins’ ability to be intrinsic or prerogative as a form of money. Since these assets can only be procured through efficient risk management as well as appropriate design, they shouldn’t be called stablecoins, argued ECB.

The report further read,

“As regulatory principles are established and approaches are defined, the term “stablecoin” should be replaced by a choice of terminology to shift the emphasis away from the issuer’s promise of stability.”

Despite this, the ECB suggested that these assets had an upside as well, yet, the term stablecoins could put users in risk by manifesting vows of stability. The Central Bank further backed its statements through its report by elaborating on the characteristics of these assets. The ECB pointed out that the price volatility of stablecoins had followed the trail of cryptocurrencies and surged in the Q1 of 2020. The volatility of stablecoins once again decreased with the drop in the price volatility of cryptocurrencies.

Capture 12

Furthermore, the ECB also highlighted how stablecoins are less likely to be perceived as a store of value asset as opposed to a payment method.

Additionally, several stablecoins were wary of their stance in Europe following the recent meeting between the Finance Ministers of the European Union. While many platforms have been prepping for the rollout of their native stablecoins, the Finance Ministers stressed on how the ECB was the only one allowed to issue currencies. However, the report restores some hope among them as the ECB highlighted that the Eurosystem was continuing to “monitor the evolution of stablecoins.”

Filed Under: World, Industry Tagged With: ECB, european union, stablecoin

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