ECB proposes dropping the term ‘stablecoin’ as misleading

The European Central Bank (ECB) proposed replacing the term ‘stablecoin’ with something less ‘misleading’. In the regulator’s new report, it is noted that this definition may apply only to correctly created and well-regulated digital assets.

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The ECB argues that existing market examples do not meet the notion of stable money, as implied by the term ‘stablecoin’.

The regulator notes the potential for growth in the use of stablecoins as a means of payment and a store of value should they become more popular, but argues that low interest rates remove the incentive to hold capital in stablecoins.

As regulatory principles and approaches are defined, the term ‘stablecoin’ should be replaced with another that shifts the emphasis away from the issuer’s promise of stability, the document says.

The ECB believes that a clear and precise definition would allow a clear line to be drawn between stablecoins and fiat currencies. The new term would also help navigate the stablecoins themselves, for example to differentiate collateralised and algorithmic stablecoins.

The regulator says the new definition is also needed to differentiate central bank digital currencies (CBDCs) from private stablecoins.

Earlier today, ECB President Christine Lagarde said that the regulator is studying the possibility of implementing a digital euro.

This month, it was reported that EU authorities were ready to establish new rules to regulate cryptocurrencies by 2024. A few days earlier, the authorities of five European countries submitted proposals to the European Commission for tightening the rules on the circulation of stablecoins.

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