Altcoin News: ECB: Regulatory Uncertainty Holds Back Spread of Stablecoins

August 30, 2019, by Marko Vidrih on ALTCOIN MAGAZINE

On August 29, the European Central Bank published a new research report entitled “In search for stability in crypto-assets: are stablecoins the solution?”

In it, stablecoins are described as digital units of value that are not a form of a particular currency but rely on a set of stabilization mechanisms to reduce fluctuations prices.

The ECB offers a classification of stablecoins based on various concepts used to maintain the constancy of their courses. The authors distinguish four main groups of stablecoins:

tokenized funds;

stablecoins secured by assets outside the blockchain;

stablecoins secured by assets on the blockchain;

algorithmic stablecoins.

The ECB counted at least 54 existing stablecoin projects, of which 24 are at the operational stage. The total market capitalization of the stablecoins, according to the report, increased from €1.5 billion in January 2018 to €4.3 billion in July 2019. The average monthly transaction volume of stablecoins from January to July 2019 amounted to €13.5 billion.

Tokenized funds were the most common type of stablecoins. They accounted for almost 97% of the monthly trading volume among all projects, according to the ECB.

Image credit: ECB

The authors emphasize that uncertainty remains in the context of regulatory perceptions of stablecoins. Their dissemination may require improved governance structures. This also applies to the possibility of updating the smart contracts underlying them.

Stablecoins that use clear governance structures are also at risk, as they can be “constrained by uncertainty in regulatory and recognition issues,” and opportunities for their use outside the distributed registry technology space may be limited, the regulator concludes.

In July, President of the German Federal Bank and ECB board member Jens Weidmann spoke out in support Facebook's cryptocurrency, saying that global regulators should not hold the project in its infancy.

Author: Marko Vidrih