- European System of Central Banks (ESCB) is open to new technologies regarding the financial sector.
- The ESCB is also planning to launch a digital version of the euro to the general public.
Mario Draghi, president of the European Central Bank, has recently sent a letter to Eva Kaili, a member of the European parliament and a well-known cryptocurrency advocate. The letter presents his views on cryptocurrencies and their future in the banking sector. As per the letter, the European System of Central Banks (ESCB) is keeping track of the financial sector and is open to new technologies associated with the purpose.
Draghi explains that digital assets and stablecoins under inspection for their probability in “monetary policy, the safety and efficiency of payments and market infrastructures and the stability of the financial system.” Draghi also mentions Libra as a new stablecoin owing to its widespread adoption uses due to being backed by large technology companies. However, Libra still needs the approval of countries like France. For now, the European Central Bank likely considers stablecoins to be of minimal use due to its design.
Draghi also explained that the situation might be different in the future in that there is a rapid growth of innovation in the space and the evolution in stablecoin business models. He stated that the G7, a group working on the stablecoin matter, is informed about the difficulties in cross border payments and access to payment services. He feels that stablecoins have had a role in bringing these challenges to light.
However, stablecoins possess their own set of risks, including those “related to monetary policy transmission, financial stability, and the smooth functioning of the global payment system.” Due to this, regulatory and policy concerns should be addressed before they are assumed suitable for their use by banks within the G7 working group. Draghi ends the letter saying that the European System of Central Banks (ESCB) is receptive to the policy questions stablecoins have raised over the past.
The ESCB is apparently planning to launch a digital version of the euro to the general public. Draghi also states that the ESCB is already implementing new technologies to help with faster settlement and cross-border payments, such as the TARGET Instant Payment Settlement Service (TIPS).
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