The European Central Bank (ECB) has reported that stablecoins do not currently pose risks to financial stability in the euro area.
The reason, according to its financial stability review, is that these digital tokens are still not used and are already covered by new European rules.
The report was written by ECB financial stability experts Senne Aerts, Claudia Lambert, and Elisa Reinhold. They explained that most stablecoin activity is limited to the crypto trading industry rather than daily payments or investments.
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The authors note that trading in the crypto sector remains the main reason people use stablecoins. They wrote:
At present, crypto trading constitutes by far the most important use case for stablecoins.
The report also cites findings from the International Monetary Fund, which show that much of the global stablecoin activity occurs across borders. However, there is little sign that these transfers are connected to remittances or other regular money transfers.
Additionally, data from Visa shows that less than 1% of stablecoin activity involves small, retail-style payments, usually under $250.
The ECB staff concluded, “The use of stablecoins seems to be primarily driven by their role within the crypto-asset ecosystem, and it remains to be seen whether stablecoins will be adopted widely across other use cases”.
Recently, the Bank of England started a public review on how to regulate stablecoins tied to the British pound. What does the proposal include? Read the full story.
