Stablecoins may suffer from regulatory uncertainty

The European Central Bank (ECB) believes that even stablecoins with a clear governance structure may suffer from regulatory uncertainty and a lack of legal norms.

In a document titled, “Searching for stability of crypto assets: are stablecoins a solution?” Officials define stablecoins as digital units of value that are not a form of any particular currency, but rather rely on a set of stabilization tools to reduce price fluctuations.

The ECB offers a classification of four types of stablecoins, which differ in the key concepts used to maintain their price stability. Officials emit tokenized currencies, secured coins outside the blockchain, secured coins on the blockchain, and algorithmic stablecoins.

At the moment, there are at least 54 stablecoin projects, 24 of which are already working. The total market capitalization of stable cryptocurrencies increased from $ 1.7 billion in January 2018 to $ 4.8 billion in July 2019. At the same time, the monthly transaction volume of stablecoins is about $ 13.5 billion.

Interestingly, tokenized cryptocurrencies are the most popular type of stablecoins. They win both in the number of projects and in the volume of transactions – almost 97% of operations occur in such coins.

According to representatives of the ECB, regulatory uncertainty can be a danger to stable cryptocurrencies. It is separately noted that for the adoption of stablecoins, improvements in the cryptocurrency management structure may be required, including the process of updating the smart contracts that underlie the project.

Recall that earlier the ECB once again reaffirmed its position regarding bitcoin, refusing to recognize it as a currency.