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ECB: stablecoins may suffer due to regulatory uncertainty

UNITED STATES, WASHINGTON (OBSERVATORY) — A new report by the European Central Bank (ECB) says that legal uncertainty can adversely affect stablecoins with a clear governance structure.

In a document titled, “Searching for stability among crypto assets: are stablecoins a solution?” Fiat-tied assets are described as digital units of value. Moreover, they are not a form of any particular currency, however, they rely on a certain set of stabilization instruments to minimize price fluctuations.

The ECB also proposed classifying steylcoins into four main groups:

– tokenized funds (Tether, USD Coin, Paxos, etc.);
– stablecoins with off-chain support (Sweetbridge);
– stablecoins secured by onchain assets (Dai, Aurora);
– Algorithmic stablecoins (NuBits).

In total, the eurozone central bank counted 54 stablecoin projects, of which only 24 are actually working. The total market capitalization of “stable coins” tripled from January 2018 to July 2019 – from € 1.5 billion to € 4.3 billion, respectively. At the same time, the average monthly transaction volume of stablecoins reached € 13.5 billion.

“Tokenized funds” in the ECB classification turned out to be the most common type of stablecoins – they account for almost 97% of the total trading volume.

According to experts, regulatory uncertainty can pose a serious risk to “stable coins.” The ECB is confident that the adoption of stablecoins can be positively affected by improvements in management structures, including the ability to update the smart contracts that underlie projects.

Recall, in a recent report by the European Central Bank , the need for continuous monitoring of the development of the entire crypto industry is mentioned.

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