Lagarde rejects comparisons between stablecoins and currencies

All cryptocurrencies and stablecoins, including stablecoins, fall under the definition of speculative assets, and recognizing them as currencies is inappropriate. This view outlined by Christine Lagarde, president of the European Central Bank (ECB).

The head of the regulator urged “to call things by their proper names” and again expressed concerns about stablecoins.

“Stablecoins are positioned as equivalents to currencies, but in reality they are not — they are merely pegged to them. Recent stories from issuers of such assets have shown that they may not be fully backed by fiat money, as claimed,” — Lagarde said.

In her view, stablecoins should be fully backed by fiat.

“We must ensure and monitor that consumers are protected from possible misinformation,” the president of the ECB explained.

The issuer of the stablecoin Tether (USDT) in a July report indicated that the share of cash and bank deposits that can be withdrawn within two days or less stood at around 10%.

In the summer of 2021, the cryptocurrency exchange Bitstamp opened deposits for Tether’s EURt stablecoin with 1:1 euro backing amid strong client demand.

Earlier, Circle disclosed information about the backing of its stablecoin. Cash and cash equivalents formed 61% of USD Coin (USDC) reserves, with the remaining coins backed by bonds and other highly liquid assets.

In August, Circle pledged to fully convert the stablecoin reserves into dollars and U.S. Treasury bills.

Earlier in April, Christine Lagarde said that the EU could issue its own CBDC within four years, if policymakers approve the project. Later, the regulator moved to the research phase of the digital euro.

In June, a member of the ECB’s Governing Council Fabio Panetta emphasized that CBDC would provide better privacy protection than private stablecoins.

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