ECB deems stablecoins impractical as a means of payment

“Stablecoins” are impractical as a means of payment; their current form is not suitable for use in the real economy. This is stated in the ECB’s Financial Stability Review.

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Analysts have concluded that the lack of regulatory oversight and the collapse of some algorithmic stablecoins such as TerraUSD point to contagion effects that such assets can trigger in the financial system.

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Major ‘stablecoins’ perform a critical liquidity function […]. This could have wide-ranging consequences for digital asset markets if a malfunction occurs or trust is lost, the report says.

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The ECB also judged the use of stablecoins as a means of payment to be impractical. The speed and cost, as well as the terms of their conversion, are inadequate for use in payments in the real economy, the experts noted.

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Analysts proposed developing a set of supervisory and regulatory measures to reduce risks associated with stablecoins to financial stability.

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The report states that their penetration in the region is limited — European payment service providers have not shown much activity.

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Under MiCA, issuers of stablecoins will be required to comply with strict operational and prudential rules, with a daily transaction limit of €200 million.

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Earlier, ECB head Christine Lagarde stated that all cryptocurrencies and stablecoins meet the definition of speculative assets and recognizing them as currencies is inappropriate.

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