ECB publishes a classification for Stable Coins

The European Central Bank (ECB) published a Paper on the effects of Stable Coins on the stability of crypto-Assets. The document focuses, in particular, a classification of Stable Coins according to their stability characteristics. A risk she sees in irregular legal regulations regarding cryptographic products.

From Polina Khubbeeva
30. August 2019BTC$9.641,05 1.96%part Facebook Twitter LinkedIn xing mail

In a on 29. August published Paper is devoted to the European Central Bank (ECB) once again, the stability of crypto-products. This time, the monetary authority of the European Union is dealing with Stable Coins. The Paper bears the title "In search for stability in crypto-assets: are stablecoins the solution? (in English: "In search of stability in crypto-Assets: Are stablecoins the solution?").

ECB distinguishes four varieties of Stable Coins

In the document, the ECB describes stablecoins as overall concepts, which apply various strategies to minimize value fluctuations. Furthermore, she makes four different types of Stable Coins. In this classification, the Central Bank distinguishes the following varieties: tokenized investments, algorithmic products, Off-Chain and On-Chain Collateral (i.e., mortgage bonds).

The most common Form of Stable Coins are according to the ECB, meanwhile, the tokenized assets. They make up almost 97 per cent of the monthly trading volume on the Stable-Coin-market.

Currently at least 54 Stable-Coin projects are, meanwhile, in the database of the ECB, 24 of which are active. The market capitalization in July 2019, amounted, therefore, to 4.8 billion US dollars. In comparison to $ 1.7 billion in January 2018, this represents an increase of almost 300 percent.

ECB sees risk in non-uniform regulation

There are, according to the ECB, as before, uncertainties in the regulation of stablecoins. Appropriate projects require in this respect a modification of certain legal requirements. A specific legal challenge, the currency, the Bank sees in the adaptation of Smart Contracts as a core object of the subject matter.

with regard to the taxation of stablecoins, the ECB proposes to make a distinction on the basis of the classification. She goes by different innovation levels and stability mechanisms, which should be reflected accordingly in the regulatory and tax assessment low. Tokenized stablecoins have a linear business model of electronic money, while Collaterals and algorithmic Coins have more innovations, but also more susceptible to fluctuations in value.

The ECB warned until the beginning of August that Bitcoin & co. could pose a threat to financial stability. Currently, is not in fact clear how many banks are investing in crypto-equipment. Thus, the impact on traditional economic and financial structures were difficult to estimate.

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