Cryptocurrencies have had a hard time gaining recognition from mainstream stakeholders all over the world. Recent disapproval in this regard came from the European Central Bank (ECB) when a research paper mentioned crypto as unworthy of becoming a mainstream currency alternative due to its inherent limitations.
The paper which was titled as Crypto-Assets: Implications for financial stability, monetary policy, and payments and market infrastructures discussed impact of crypto on regional monetary policies and economic development. It was mentioned that the overall value of the crypto currency in circulation is extremely small as compared to the mainstream economy and merchants are very reluctant to accept it as a mode of payment due to high price volatility.
Moreover, crypto was criticized for lack of backing in the form of a central institution, such as a monetary authority or a central bank. High volatility of crypto assets also means that it cannot be used as a trusted source of storing value, making it extremely difficult for crypto to be a unit of account. However, the ECB also clarified that the institution does not believe these digital currencies to be a threat to financial stability and economic development of the Eurozone region.
Only a few months back, an important ECB policymaker and governor of Central Bank of Estonia, Ardo Hansson, also severely criticized crypto and went on to term the whole concept as “loads of nonsense”. A similar comment was also made by Mario Draghi, the ECB President, according to which crypto can never be a proper currency.
On the hand, however, StableCoin seems to be grabbing the attention of the European stakeholders in a positive manner. The region’s Central Bank claimed to be interested in recent developments and sees StableCoin playing a mainstream role in the near future. The reason cited by the ECB was that this particular currency is associated with the physical asset, as opposed to crypto which does not have any such backing, and, hence, is likely to be less volatile. Furthermore, in a recent statement, Governor of the Bank of France informed the press that his bank was closely observing latest developments related to this type of coin and the phrase he used was “great interest”.
While these comments should not come as a surprise to industry observers, they surely indicate what to expect in the financial future of the eurozone. While crypto seems to be getting ground in some parts of the world, it may still be a very difficult journey in the euro region.