• The European Central Bank regards crypto assets as economic advancement.
  • The ECB sees great potential in stablecoins.

The European Central Bank (ECB) has made it clear that it does not regard cryptocurrencies as a threat to financial stability in Europe. The Central Bank has highlighted the importance of crypto assets on economic advancement and monetary policies in the region in a recently released paper called “Crypto-Assets: Implications for financial stability, monetary policy, and payments and market infrastructures.”

The bank declared that the combined value of crypto assets is way smaller in comparison to the mainstream economy. Only a few merchants accept digital currency as payments because of its volatile nature. The ECB explained: 

“The high price volatility of crypto-assets, the absence of central bank backing and the limited acceptance among merchants prevent crypto-assets from being currently used as substitutes for cash and deposits, as well as making it very difficult for crypto-assets to fulfill the characteristics of a monetary asset in the near future.”

Regarding the decentralized nature of cryptocurrencies, the bank said:

“The absence of any specific institution (such as a central bank or monetary authority) protecting the value of crypto-assets hinders their use as a form of money, since their volatility: a) prevents their use as a store of value; b) discourages their use as a means of payment; and c) makes it difficult to use them as a unit of account.”

The Central bank believes that stablecoins have great potential since they are less volatile and pegged to physical assets. They are monitoring the development of these assets.


 

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