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Kriptoteka > Market > Defi > ECB Urges Global Regulation Framework for Stablecoins
Defi

ECB Urges Global Regulation Framework for Stablecoins

marcel.mihalic@gmail.com
Last updated: September 22, 2024 4:52 am
By marcel.mihalic@gmail.com 5 Min Read
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ECB officials emphasize the necessity for an international regulatory approach

As Stablecoin technology continues to navigate international boundaries, ECB officials advocate for policymakers to adopt a global perspective towards regulation, prompting the swift establishment of essential regulatory, supervisory, and oversight systems, including the MiCA legislation, prior to any further integration of these digital currencies with the conventional financial landscape.

The European Central Bank (ECB) has published its latest report titled “A deep dive into crypto-financial risks: stablecoins, DeFi and climate transition risk”, which examines the implications of stablecoins and the associated financial risks related to cryptocurrency.

In its DeFi report, the ECB stated:


“As vulnerabilities begin to emerge, an internationally coordinated strategy is essential to reduce DeFi risks before they threaten financial stability,”

“Presently, connections with the traditional financial sector remain limited, yet they have the capacity to grow swiftly in light of increasing institutional interest.”


Initially regarded mainly as a “relatively secure ‘parking space,’” the applications for stablecoins like e-money.com’s 100% Collateralized European Stablecoins, aimed at delivering scalable solutions for DeFi ecosystems via various interest-yielding currency-backed stablecoins, have surged in recent years, marking another fast-evolving segment of the crypto marketplace.

While recognizing that DeFi platforms harness technology-driven innovation and vary in several aspects like asset management, trust formation, and system governance, the ECB asserts that they do not innovate new financial products but rather replicate those available from traditional financial institutions. Concurrently, “DeFi exhibits many vulnerabilities akin to traditional finance,” elaborates the central bank:


“DeFi protocols or platforms profess to have a decentralized governance model, though in reality, control is frequently centralized.”

In response to the ECB’s findings, the International Organisation of Securities Commissions (IOSCO) and the Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) issued conclusive guidance on stablecoin practices advocating for ‘Same Risk, Same Regulation’ to ensure stablecoin frameworks comply with international standards for payment, clearing, and settlement systems.

Both global financial organizations acknowledged the benefits of stablecoins over existing payment mechanisms and financial market structures and provided further clarifications regarding the applicability of Principles for Financial Market Infrastructures to stablecoin systems, assessing their systemic relevance, and guaranteeing settlement finality.

The IOSCO and the Bank for International Settlements’ Committee on Payments and Market Infrastructures (CPMI) emphasized the need for collaboration among central banks, advocating a unified international effort to recognize and address regulatory shortcomings.

Disclaimer:

GlobalStablecoins.com serves as an informational platform offering news about cryptocurrencies, blockchain enterprises, products, and events. It is not to be interpreted as investment counsel. Consult with a financial advisor before investing in an ICO, Cryptocurrencies, Cryptoassets, Security Tokens, Utility Tokens, Exchange Tokens, Global Stablecoins, Stablecoins, or eMoney Tokens. GlobalStablecoins.com is not liable, whether directly or indirectly, for any damage or loss experienced as a result of utilising or relying on any content found on the site.


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