The European Central Bank (ECB)’s chief Christine Lagarde spoke positively about stablecoins and blockchain technology in her first press conference. Lagarde spoke about being “ahead of the curve” in terms of blockchains and incorporating stablecoins.
A surprise from the ECB chief
Regulatory bodies around the world have a hawkish view on digital currencies. Countries with large financial markets like India and China have already imposed bans and restrictions on cryptocurrency buying, selling and use. However, ECB chief Lagarde’s positive stance on stablecoins comes as a breath of fresh air.
Stablecoins are digital assets that are connected to a single asset or a pool of assets. For instance, the Tether stablecoin (USDT) is connected 1:1 with the US Dollar. Paxos recently launched Pax Gold, a digital stablecoin pegged to gold. These assets are less volatile compared to standard digital currencies like Bitcoin and Ethereum.
During her December 12 press conference, Lagarde said that ECB would be “highly accommodative” in its monetary policy to push inflation further. Regarding digital currencies, she said, “Given the developments, we see, not so much in the bitcoin segment but in the stablecoins projects.” She acknowledged that there is a demand for such assets and the regulator needs to respond to it.
What should the world expect?
The crypto community was buoyant on Lagarde’s remarks and took it as a positive sign for the digital asset market. Adamant Capital founding partner Tuur Demeester said that the remarks suggest that the ECB could enter the stablecoin market in some capacity. The scale of this entry is unknown, but it would be highly encouraging to other players in the industry.
Lagarde’s view on cryptocurrencies is based on a stablecoin whitepaper from a G7 working group. The group was led by the head of Committee on Payments and Market Infrastructures (CPMI) Benoît Cœuré. The whitepaper suggests that stablecoins are new and untested technology. Benoît Cœuré noted in a press release later that stablecoins will pose a huge risk for financial markets and public policy. The regulators will need to define very high standards for regulatory approval of such assets.
According to the Bank for International Settlements (BIS), stablecoins have the potential to create a more efficient system of global payments. It highlighted the role of such coins in anti-money laundering efforts across the world and providing better operational resilience and tax compliance. It could also be used for better data protection. These assets, their report suggests, could pose a serious challenge to financial stability, monetary policy and competition policy.
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