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European Central Bank Says “Stablecoin” Term Is Misleading

European Central Bank Says “Stablecoin” Term Is Misleading

As the European Central Bank prepares plans for a digital Euro, they have also issued a warning about the nature of so-called stablecoins.





The ECB released a report that laid out the possibilities of a digital Euro and what it could mean for the European economy. While the report describes positive impacts from digitization, the ECB is critical of some aspects of the cryptocurrency industry.





The central bank says that the term “stablecoin” does not accurately describe how the asset is actually backed. 





“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.”





The ECB is basically warning that while billed as an asset that won’t fluctuate in price, there is no guarantee anyone’s funds will be insured. Instead, the bank recommends more descriptive names. These stablecoins should be categorized into several groups based on what they are backed by. For example, collateralized stablecoins should be named differently than algorithmic stablecoins according to the ECB.





The discussion of stablecoins comes during a time when digital versions of fiat money are on the brink of becoming popular political stances all over the world. But governments are still trying to hash out the way to provide the advantages of cryptocurrency and still have the stability that fiat currencies offer and the protections of the traditional banking system.





Christine Lagarde, President of the ECB thinks that issuing a digital Euro will bring a lot of advantages to the EU. She says the move will “increase our autonomy and ensure that Europe is better protected in the world of tomorrow. As legislators, you have a crucial role to play in designing policies that can revitalise our economies.”





Just days ago, the move to digital currencies was called the new “battlefield between nations” by the Chinese government. China would have a head start on the rest of the world, but others may have to follow suit. Clearly, countries around the world are seriously considering if digital currencies will soon be a necessity.


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