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 akin to cryptocurrencies and stablecoins – digital belongings the values of that are pegged to fiat currencies.
Lagarde mentioned the primary threat of cryptocurrencies is a function that crypto proponents contemplate a plus, particularly that cryptos rely purely on expertise and that there isn’t any identifiable issuer or declare. Because of this, Lagarde mentioned, cryptocurrencies undergo from an absence of liquidity, stability and belief, and due to this fact “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 set worth or is considered as not with the ability to soak up losses, it may set off a run.
In what was seemingly a shot at libra, Lagarde mentioned stablecoins, “notably these backed by international expertise companies … 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 keeping with a current report within the Monetary Instances.
“Their dominant positions could hurt competitors and client selection, and lift issues over information privateness and the misuse of non-public info,” Lagarde mentioned of stablecoins backed by Large Tech.