Today the European Central Bank (ECB) published a paper reviewing the current status of stablecoins and their potential impact on monetary policy, stability, payments and other areas. Some of the risks are similar to concerns about a central bank digital currency, especially concerning displacing banks. But the risks of “runs” on stablecoins are significant and potentially more contagious than typical bank runs.
The ECB outlined three scenarios for the use of stablecoins. The first is as a crypto-asset accessory where it’s referring to the current role of stablecoins, which is more-or-less limited to the (small) cryptocurrency community. It’s less worried about that and more concerned about the other two scenarios where stablecoins could potentially be used for mainstream payments or as a store of value.
In passing, it also mentioned a fourth scenario of central bank digital currency (CBDC), which it said would make the stablecoin “value proposition redundant (at least for domestic payments) “.
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