According to Cointelegraph's recent report, the European Central Bank said that the lack of regulation and its uncertainty may hinder the development of stable currencies with a clear regulatory framework.
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Overview of four major stable currency types
On August 29th, the European Central Bank issued a new document devoted to stabilizing the currency. The document describes the stable currency as a unit of digital value rather than some form of any particular currency. The stable currency relies on a set of stabilization tools to minimize price volatility.
In addition, this paper "seeking the stability of encrypted assets: is the solution to the problem?" Based on different key concepts, a classification method for stable coins is proposed. Specifically, the ECB outlined four main types of stable currencies, namely tokenized funds, off-chain collateralized stable coins, and on-chain collateralized. Stablecoin) and algorithmic stablecoins.
54 kinds of stable coins with a total market value of 4.8 billion US dollars
According to data from the European Central Bank, there are currently at least 54 stable currency projects, 24 of which are in operation. The total market value of stable currencies has increased from 1.5 billion euros (about 1.7 billion US dollars) in January 2018 to 4.3 billion euros (about 4.8 billion US dollars) in July 2019, almost tripled. From January to July 2019, the average monthly transaction volume of the stable currency was 13.5 billion euros.
According to ECB data, token-based stable currency is the most popular stable currency type, accounting for nearly 97% of all other stable currency monthly totals.
Uncertainty constitutes a significant risk
In the report, the European Central Bank emphasized on the one hand the uncertainty of the stability and management of the stable currency. The report stated that the adoption of stable currency may need to improve its management, such as the process of updating the project's core smart contract.
On the other hand, stable currencies with a clear regulatory framework are also at risk because they may “cause uncertainty due to lack of regulatory review and recognition, and development is hindered”. However, for financial institutions to use the technology to record traditional assets, the certainty of regulation is particularly important. The European Central Bank concluded that in this case, the use of DLT outside the crypto-asset market will be redundant.
In July 2019, an ECB official expressed concern about the use of stable currency. He said that although there is no reason to panic, there is absolutely a reason to be vigilant against the stable currency.