The council and commission warned the development of “stablecoins”—in light of a G7 working group studying the issue—should be tempered until a number of risks associated with them are mitigated, according to a recent report. While acknowledging the relative speed and cost effectiveness of the currencies and the transactions they can help facilitate, especially with respect to cross border payments, the council and commission also warned of “multifaceted challenges” associated with them and called for, among other things, “legal clarity.”
Among some of the concerns listed in the report are: “consumer protection, privacy, taxation, cyber security and operational resilience, money laundering, terrorism financing, market integrity, governance and legal certainty,” according to the statement.
The report notes technological advancement has appealing benefits, like promoting competition, broadening consumer choice and increasing efficiency, but globalized “stablecoins” can potentially threaten monetary sovereignty and financial stability. “Stablecoins” are a type of cryptocurrency backed by some other asset or group of assets.
“Global ‘stablecoin’ projects and arrangements should not come into operation until all of these risks and concerns are properly addressed,” the report reads. “We reaffirm our willingness to appropriately tackle the challenges raised by these initiatives on the basis of an EU common understanding and coordinated approach. These initiatives should not undermine existing financial and monetary order as well as monetary sovereignty in the European Union.”
From Twitter
The British Virgin Islands announced the development of U.S. dollar-back stablecoin
Without mentioning any by name, the council and commission cited some “projects of global dimension” that have failed to provide adequate information regarding their business model and “precisely” manage risk. As such, it said, a lack of adequate information makes it difficult to reach a conclusion on how these projects fit into existing regulatory frameworks.
“Tackling the challenges raised by ‘global stablecoins’ requires a coordinated global response. The risks raised by 'stablecoin' arrangements should be subject to clear and proportionate regulatory and oversight frameworks, established on a sound evidence base and based on general principles and applicable to all 'stablecoin' arrangements,” it continues. “All options should be on the table, including any measures to prevent the creation of unmanageable risks by certain global ‘stablecoins.’”
Deutsche Bank Imagine 2030 Report Issues Bold Predictions About Coming Decade
A recent Deutsche Bank report, entitled 'Imagine 2030' (PDF), prognosticates on how projects and cryptocurrencies like Bitcoin, Facebook’s Libra and others will impact the global economy.
“…Cryptocurrencies have always been additions, rather than substitutes, to the global inventory of money. They have not managed to take off as a means of payment despite their well-known benefits, such as security, speed, minimal transaction fees, ease of storage and relevance in the digital era,” according to the Deutsche Bank report. “Looking ahead, this situation may be different. One major prediction the report makes is a large-scale, sanctioned shift toward the elimination of cash.
“On the supply side, governments, banks and cards are moving towards a cashless society,” it reads. “Governments, banks and card providers share at least a goal: the elimination of cash.” Further, the report also predicts burgeoning blockchain applications and a greater adaptation of cryptocurrencies.
“Until now, China and India banned the purchase and the sale of cryptocurrencies. But things are moving quickly,” it reads. “In late October, Chinese President Xi Jinping endorsed blockchain as ‘an important breakthrough for independent innovation of core technologies.”
The People’s Bank of China is expecting to replace cash with a centralized digital currency as well, it states.
