ESCB Mulls the Concept of Creating a Euro-backed Stablecoin

Banks and other financial institutions are well aware of cryptocurrencies and digital assets. So much even that the European System of Central Banks may create its own Euro-backed stablecoin fairly soon. Although these plans are not officially confirmed, a recent communication shows the plan is at least being considered. 

ECSB Takes Note of Digital Assets

In recent years, the European Central Bank has remained relatively quiet regarding Bitcoin and other cryptocurrencies. This is primarily due to the lack of actual regulation in Europe. It is also a relatively unimportant continent for such markets, especially when compared to the US and Asia.  That being said, the European System of Central banks has taken note of how these industries are evolving and growing. 

So much even that the group is more than willing to experiment with new technologies, as long as they align with the ESCB’s purposes. It seems unlikely cryptocurrencies fall into that category at this time, although things could be different where certain digital assets are concerned. Particularly the concept of stablecoins has struck a chord, as there is a growing demand for digital euros.  Whether that will result in an actual issuance of such an asset, is a different matter altogether. 

A Stablecoin Makes Sense

One thing that has to be said how stablecoins would make a lot of sense to the ESCB and ECB alike. These assets have tremendous potential in terms of monetary policy and efficiency of payments, especially when compared to the current traditional financial solutions. Widespread adoption of such a digital asset would not necessarily pose any problems either, as it is a currency to be used both within the EU as well as the rest of the world. 

At the same time, the stablecoin would need to be tied to a reserve currency, or even a selection of currencies. In that regard, it would not automatically strengthen the Euro but potentially expose it to even more fluctuations. The ECB is wry of this aspect, and claims a stablecoin only has limited use in its current form. However, a solution for cross-border payments needs to be found sooner rather than later Digital currencies, such as a Euro-backed stablecoin, would be of great help in that regard. 

Stablecoin Regulation Seems Imminent

One thing to take away from the communication by the EBC is how additional regulation may come to the stablecoin industry in the next few years. What that regulation will entail exactly, is not yet decided. It is evident these digitized currencies can threaten financial stability and may disrupt the global payment system by breaking it beyond repair. It is never a good time for hasty payments, especially not where projects like these are concerned. 

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