The ECB President Mario Draghi, in a letter to Markus Ferber, a Member of the European Parliament, provided an overview of the work of the European System of Central Banks (ESCB) in assessing the potential risks of stablecoin initiatives to financial stability and operational and cyber resilience. ESCB is closely monitoring innovation in the financial sector, including stablecoin projects such as Libra, said Mr. Draghi. Central banks in the ESCB are also contributing to the ongoing work of the G7 working group on stablecoins, which is chaired by the ECB Executive Board member Benoît Cœuré in his capacity as Chair of the BIS Committee on Payments and Market Infrastructures.
As large technology or financial firms could leverage vast existing customer bases to rapidly achieve a global footprint, it is imperative that authorities be vigilant in assessing risks and implications for the global financial system. Stablecoin initiatives must ensure public trust by meeting the highest regulatory standards and be subject to prudent supervision and oversight. From a regulatory perspective, stablecoins, like any other emerging financial product, should be subject to the “same business, same risks, same rules” principle based on a comprehensive assessment of their functionalities, said Mr. Draghi in his letter. Technology-neutral regulation not only prevents regulatory arbitrage but also helps avoid the risk of inadvertently constraining technological development. To ensure a level playing field, the ESCB intends to pursue an internationally consistent approach together with the global central bank community and standard-setting bodies.
Related Link: ECB Letter (PDF)
Keywords: Europe, EU, Banking, Stablecoin, Libra, Cryptocurrencies, Financial Stability, ECB
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