The European Central Bank (ECB) has clarified that it does not see digital currencies as a threat to the financial stability of the eurozone.
In a recently released paper called “Crypto-Assets: Implications for financial stability, monetary policy, and payments and market infrastructures,” the central bank outlined the impact of crypto assets on economic development and monetary policies in the region.
The bank stated that, compared to the mainstream economy, the combined value of crypto assets is still small and, due to their volatile prices, a small number of merchants accepts them as payment.
“The high price volatility of crypto-assets, the absence of central bank backing and the limited acceptance among merchants prevent crypto-assets from being currently used as substitutes for cash and deposits, as well as making it very difficult for crypto-assets to fulfill the characteristics of a monetary asset in the near future,” the ECB noted.
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Are stablecoins becoming the norm?
However, the central bank has a different stance for stablecoins. As these digital currencies are pegged to physical assets, they are less volatile, and the ECB is monitoring the development of these assets.
Mentioning the decentralized nature of the digital currencies, the bank noted: “The absence of any specific institution (such as a central bank or monetary authority) protecting the value of crypto-assets hinders their use as a form of money, since their volatility: a) prevents their use as a store of value; b) discourages their use as a means of payment; and c) makes it difficult to use them as a unit of account.”
Earlier this year, Ardo Hansson, governor of the Central Bank of Estonia and an ECB policymaker, attacked cryptocurrencies, calling them a “complete load of nonsense.” A similar sentiment was echoed by Mario Draghi, the president of the European Central Bank who slammed Bitcoin for not being a currency.
Stablecoins, on the other hand, are grabbing the attention of the institutions as the governor Bank of France recently revealed that the bank is observing the developments of such coins with “great interest.”