The European Central Bank (ECB) warns about the risks of Stablecoins for European banks and the financial system. The cryptocurrencies linked to a stable currency, usually the US dollar, could in the event of a loss of confidence and emergency sales of deposited assets endanger the stability of the financial markets central bankers warn.
Strong growth in stablecoins could also lead to deposits from traditional The bank be deducted, according to a report published on Monday Financial stability.
240 billion euros market capitalization
Stablecoins now have a market capitalization of 280 Mrd. US-Dollar (around 240 billion euros). They are mainly used in crypto trading, for example for parking crypto investments. For example, investors can use this to avoid taxes that would be incurred if they were converted back into traditional currencies.
Because they are tied to traditional assets, they are not subject to as high price fluctuations as other cryptocurrencies. Stablecoins also have great potential cross-border payment transactions attributed. According to the ECB, 80 percent of all transactions on cryptocurrency exchanges are related to stablecoins.
Distress sales
The stablecoins are secured with traditional financial instruments, such as US government bonds. The sector is dominated by Tether (USDT) and that issued by the US company Circle USD Coin (USDC)that together almost 90 percent market share and are among the largest holders of such bonds. The asset reserves are comparable to the 20 largest money market funds, says the ECB report.
If the value of stablecoins decouples from the reference value, this could lead to a loss of confidence and fire sales, warns the ECB. This could have a massive impact on the functioning of the US Treasury bond markets. This could also have an impact on the Eurozone if, for example, European issuers are involved and there are not enough reserves to buy back the stablecoins.
Outflows from bank deposits
In addition, the further spread of stablecoins could endanger banks by causing significant losses Cash outflows from bank deposits lead. “As a result, an important source of financing for banks would disappear and their financing as a whole would become more susceptible to fluctuations,” it says.
This would be particularly problematic if crypto platforms Interest charges would pay on stablecoin holdings. This is done in the EU regulatory requirements forbidden. In the USA, direct interest payments are also prohibited under the Genius Act regulation passed in the summer, but loopholes make it possible to circumvent the ban.
Risks in the euro area are still limited
According to central bankers, the financial risks posed by stablecoins in the euro area are currently still limited overall. However, the rapid expansion and increasing networking of coins with traditional markets requires close monitoring.
The European Union came into force at the end of last year MiCAR regulation (Markets in Crypto-Assets Regulation) A far-reaching regulatory framework has already been created to counteract further risks, the report continues. Nevertheless, it is important to keep an eye on regulatory gaps and cross-border risks.
One increased global regulation and harmonization is in any case necessary to limit risks and prevent negative effects on financial stability, according to the ECB.