Experts from the main European regulator recommend reducing the number of stablecoins, as they may adversely affect financial stability.
The European Central Bank (ECB) has published a report on the results of an analysis of the growth of the digital currency market over the past decade and listed the risks that the young industry poses to the existing financial system.
A separate section of the report was devoted to stablecoins and their important role in the current ecosystem. Stablecoins are increasingly being used to link various blockchain networks and play a critical role in providing liquidity to the decentralized finance (DeFi) ecosystem, the report says.
ECB analysts believe that the lack of oversight of stablecoins by regulators could adversely affect the entire financial system. As an example, experts cited the recent collapse of the Terra cryptocurrency (LUNA) and the TerraUSD stablecoin tied to it:
“The largest stablecoins play an important role in the liquidity of cryptocurrency markets, which can have wide-ranging consequences for these same markets if any stablecoin collapses or temporarily fails.”
The ECB is rejecting the idea of using stablecoins as a means of payment, as the speed, cost and terms of their redemption were “inadequate for use in real market conditions.”
The regulator recommends the development of supervisory and regulatory legislative measures so that stablecoins do not pose a risk to financial stability in European countries.
Last week, the ECB demanded that the EU countries comply with uniform standards when preparing national laws on the regulation of the cryptocurrency industry.
Source: Bits
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