Stablecoin Risks Seen As Minimal In Europe Amid Low Adoption And...
The European Central Bank said stablecoin risks in the euro area are limited, with crypto trading dominating use and retail adoption under 1%, while monitoring continues.
Financial stability experts at the European Central Bank (ECB) said stablecoin-related risks in the euro area are limited due to low adoption and preventative regulation.
The ECB on Monday published its financial stability review pre-release, devoting it to the growing market of stablecoins, which are digital assets pegged to the value of fiat currencies or commodities.
Authored by ECB financial stability experts Senne Aerts, Claudia Lambert and Elisa Reinhold, the report questioned stablecoin use cases beyond crypto trading and highlighted their low financial stability risks in the euro area.
“Currently, financial stability risks stemming from stablecoins are limited within the euro area, but the rapid growth justifies close monitoring, while risks stemming from cross-border regulatory arbitrage should be resolved,” the report said.
“At present, crypto trading constitutes by far the most important use case for stablecoins,” the authors said, adding that other use cases, such as cross-border payments, “play only a minor role.”
Citing a July study by the International Monetary Fund, the report said that a large share of stablecoin flows were cross-border, but noted a lack of evidence that these flows were systemically linked to remittances.
The report also highlighted limited stablecoin use in retail transactions, referring to Visa’s estimates that only about 0.5% of stablecoin volumes were organic, retail-sized transfers (less than $250).
“The use of stablecoins seems to be primarily driven by their role within the crypto-asset ecosystem, and it remains to be seen whether stablecoins will be adopted widely across other use cases,” the ECB staff concluded.
With stablecoins not being widely used for transactions involving real-world assets, especially within the euro area, the stablecoin market does not pose urgent financial stability risks for Europe, the report said.
Source: CoinTelegraph
