- Experts think the president’s remarks suggest the ECB would make some kind of inroads into the stablecoin market.
- Christine Lagarde referred to a whitepaper, which entails risks and benefits that global stablecoins may pose.
Christine Lagarde, in her first press conference as the president of the European Central Bank (ECB), pledged to get “ahead of the curve” in the evolving environment of “stablecoins,” considered to be less volatile versions of blockchain currencies due to their peg to a pool of assets. The main message that was conveyed by Lagarde was that the European Union’s central bank would continue with a “highly accommodative” monetary policy to buoy inflation. She addressed the ECB’s policy perspective on digital currencies as well.
The ECB chief stated that “given the developments we are seeing, not so much in the bitcoin segment but in the stablecoins projects,” the ECB needs to be “ahead of the curve” because “there is clearly a demand out there that we have to respond to.” Founding partner of Adamant Capital, Tuur Demeester, said that Lagarde’s remarks suggest the ECB would make some kind of inroads into the stablecoin market.
He tweeted:
Looks like the ECB will be entering the stablecoin business.
Lagarde referred to a whitepaper on stablecoins that’s produced by a Group of Seven (G-7) working group chaired by Benoît CÅ“uré, head of the Committee on Payments and Market Infrastructures (CPMI). The paper examines the risks, challenges and benefits of global stablecoins. In a press release, CÅ“uré spoke about policy and regulatory issues posed by the emergence of stablecoin initiatives backed by financial institutions and big tech.
He said:
As a new technology, stablecoins are largely untested, especially on the scale required to run a global payment system. They give rise to a number of serious risks related to public policy priorities. The bar for regulatory approval will be high.
While noting the potential benefits of less volatile digital currency like stablecoin in its report, the working group called for a better understanding of the risks as well.
Introducing the paper, The Bank for International Settlements (BIS) stated:
Stablecoins, which have many of the features of earlier cryptocurrencies but seek to stabilize the price of the ‘coin’ by linking its value to that of a pool of assets, have the potential to contribute to the development of more efficient global payment arrangements”¦.The working group report finds that stablecoins, regardless of size, have implications ranging from anti-money laundering efforts across jurisdictions to operational resilience (including for cyber security), consumer/investor and data protection, and tax compliance. Global stablecoins may amplify those challenges and could also pose challenges to competition policy, financial stability, monetary policy and, in the extreme, the international monetary system.
Lagarde said that the ECB had also set up a task force “to make significant strides toward establishing and achieving clear objectives for the development of its own digital currency.” She also noted that the central bank had already conducted many experiments and “pilots here and there” and that the task force would come up with more clearly defined project objectives for its own digital currency.
She added:
Are we trying to reduce cost? Are we trying to cut out the middleman? Are we trying to have inclusive finance at all costs-at no cost? There’s a whole range of objectives that can be pursued, so I think we will start by doing that.
Apart from discussions on “this sort of glamorous central bank digital currency, much talked about and worth exploring,” the Eurosystem already has digital payment systems in place.
So on those digital systems that exist, some of which need a better take-up by some of the members of the system, I will continue to push because I think we have something which is really worth developing and encouraging. I’m talking here about TIPS and PEPS and all those acronyms that I should not be using, but I don’t know what they stand for. All I know is that they deliver in digital terms the operations of clearing and settling, sometimes in one single operation.
Share
