Stablecoins may “threaten monetary safety” if broadly adopted, European Central Financial institution President Christine Lagarde mentioned in an article revealed Monday in journal L’ENA hors les murs.
Within the piece, Lagarde makes a bullish case for a digital euro whereas throwing shade at potential rivals equivalent to cryptocurrencies and stablecoins – digital property the values of that are pegged to fiat currencies.
Lagarde mentioned the principle threat of cryptocurrencies is a characteristic that crypto proponents contemplate a plus, specifically that cryptos rely purely on expertise and that there isn’t any identifiable issuer or declare. Because of this, Lagarde mentioned, cryptocurrencies endure from a scarcity of liquidity, stability and belief, and subsequently “don’t fulfil all of the capabilities of cash.”
Whereas noting stablecoins try to repair these points and will drive added innovation in funds, they “pose critical dangers,” Lagarde mentioned.
“Utilizing stablecoins as a retailer of worth may set off a big shift of financial institution deposits to stablecoins, which can have an effect on banks’ operations and the transmission of financial coverage,” the ECB head added.
Lagarde additionally mentioned that if a stablecoin issuer can’t assure a hard and fast worth or is considered as not having the ability to take up losses, it may set off a run.
In what was seemingly a shot at libra, Lagarde mentioned stablecoins, “notably these backed by world expertise corporations … may additionally current dangers to competitiveness and technological autonomy in Europe.” Libra was first introduced by Fb in June 2019 and is now set to launch in January 2021 in a restricted capability, in response to a latest report within the Monetary Occasions.
“Their dominant positions could hurt competitors and client selection, and lift considerations over information privateness and the misuse of private info,” Lagarde mentioned of stablecoins backed by Massive Tech.
