A new European Central Bank (ECB) report calls for the term “stablecoin” to be reformed or reconsidered because of its ambiguity.
The 30-page report the Eurozone’s central bank, published Tuesday, drew a distinction between stablecoins and existing forms of currencies, defining stablecoins by a few key characteristics based on the purposes they serve: as a crypto asset, as a new payment method, and as an alternative store of value.
The report referred to stablecoins as digital units of value that are not a form of any currency, and which rely on tools to decrease their price fluctuations against existing, government-issued currencies.
According to the report, although the term “stablecoin” has various benefits, the use of the term could make false promises of stability and consequentially put consumers at risk.
“The term “stablecoin” may be perceived to have positive connotations in terms of stablecoins’ intrinsic stability and usability as a form of money but these features are neither intrinsic to, nor a prerogative of, stablecoins in and of themselves – instead they can be attained only through appropriate design and effective risk management,” the report read.
© 2020 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.