The European Central Bank (ECB) has said the term “stablecoin” should be replaced with something less “confusing” or potentially “misleading”.
- The Eurozone's primary financial institution said in a report Tuesday that a properly designed and well-regulated digital asset could live up to the name, but that existing examples fell short of the intrinsically stable money substitute that the term "stablecoin" implies.
- The ECB's 30-page report says the growth of stablecoins in Europe could result in their increasing use as a new payment method or as an alternative store of value.
- The term stablecoins refers to digital assets that are designed to have minimal price fluctuations, generally by being backed by or pegged to assets such as fiat currency or gold.
- While the ECB says rock-bottom interest rates likely remove much incentive for users to hold value in stablecoins, at least for the foreseeable future, it suggests consumers are still in danger of being confused or misled by the name.
- "As regulatory principles are established and approaches are defined, the term 'stablecoin' should be replaced by a choice of terminology to shift the emphasis away from the issuer’s promise of stability," the ECB said.
- Unambiguous phrasing would better distinguish stablecoins from fiat currencies and would serve to also differentiate various types of stablecoin – for example, collateralized stablecoins from algorithmic ones – the central bank said.
- It might also demarcate private initiatives from those of central banks – known in the industry's lexicon as central bank digital currencies (CBDCs).
- Earlier today, ECB chief Christine Lagarde said a digital euro could become a viable alternative to existing cryptocurrencies and also prevent the Eurozone's monetary sovereignty from falling into the hands of private companies.