In a recent in-depth written report on global stablecoins, the European Central Bank, or ECB, pushed for clear regulatory parameters for stablecoins, citing risks as well as gaps in electric current regulations.

"In order to reap the potential benefits of global stablecoins, a robust regulatory framework needs to be put in identify in guild to address these risks before such arrangements are immune to operate," the ECB wrote in its May v report.

The deep swoop sees potential, but non without risks

The ECB's report noted several benefits effectually international stablecoins, including speed and simplicity — aspects the public deems important.

The governing banking concern, even so, did not shy away from detailing the diverse risks and difficulties possible with such a currency type, including questions on stability, value and possible systemic failure. One specific risk sees users non able to cash in on their verbal "stable" value if the asset loses its value peg, or if its backing deviates from an expected level. As the written report put it:

"At that place is a chance that cease users will regard the stablecoin equally being equivalent to a deposit, given the promise of 'stable' value and the possibility of converting coin holdings back into fiat currency at whatever fourth dimension."

Ane size fits all may not be the best approach

The study also touched on the topic of regulation. Borderless stablecoins may or may not fit governmental frameworks in existence at nowadays.

Depending on the their type, stablecoins tin derive their value from a number sources, including mainstream fiscal assets, crypto assets and fiat currencies, making regulatory waters unclear. Some stablecoins might even fall under the investment category rather than a source of stable value.  The ECB said:

"Given the complexity of its structure, a stablecoin arrangement could, depending on its specific blueprint features, autumn under one of a number of different regulatory frameworks – or, potentially, none of them."

The ECB likewise studied Facebook's Libra in its written report, relating various numbers and metrics to different scenarios.

Although the ECB called for regulatory clarity, the governing trunk also mentioned the need for a well-rounded approach. "To reap their potential benefits without undermining fiscal stability, nosotros must ensure that stablecoin arrangements do not operate in a regulatory vacuum," the ECB concluded.

Central Bank Digital Currencies, a classification of stablecoin, take also visited numerous headlines in contempo weeks as countries blitz to figure out the best approach for a digital transition.

Cointelegraph reached out to the ECB for additional details, but received no response every bit of printing time. This article will be updated appropriately should a response come in.