The European Commission has been critical of central bank-backed digital currencies, however it suggests that stablecoins would be a better option than traditional coins.
The “how to use stablecoins” is a type of cryptocurrency that is pegged to the value of an asset. The EU regulators are criticizing the stablecoins because they believe that it will promote Euro CBDC.
The current Terra Luna incident is being used by EU officials to argue for a Digital Euro CBDC.
Many people will perceive the increased volatility caused by the assault on the algorithmically backed stablecoin UST as a rationale to tighten stablecoin regulation. With $16 billion in USTs disappearing in days, it’s difficult to argue against requests for more investor protection.
The UST attacker’s identity is presently unknown. There are several possibilities, but there is yet no clear evidence to imply government or institutional participation. However, a common thread running across all of the explanations is that the purpose was to cause volatility in the stablecoin market in order to hasten CBDC adoption.
During the crisis, Janet Yellen testified before the US Treasury Committee, the UK Treasury repeated its willingness to regulate stablecoins, and now the EU is throwing its hat into the ring. The European Central Bank’s (ECB) Fabio Panetta, who is in charge of designing a CBDC for Europe, said,
“Recent events in the crypto asset market demonstrate that believing private instruments may operate as money when they cannot be exchanged at par into public money at all times is a delusion… There’s no assurance that they’ll be redeemed at par at any point in the future – only last week, the world’s largest stablecoin lost its linkage to the dollar.”
The fact that no other currency has made any serious progress into the field is a compelling justification for a chilly attitude toward crypto-backed stablecoins. Over 99 percent of all stablecoins in circulation are backed by the US dollar rather than the British pound, the euro, or any of the other fiat currencies.
The graph below depicts the top fiat system’s market share of cryptocurrencies.
The current news in conventional media focuses on Bitcoin’s environmental effect and the advantages of proof of stake over proof of work.
Any CBDC report that has been made public focuses on a proof of stake mechanism that utilizes the least amount of energy possible. “A digital euro can only be effective if prospective consumers believe it adds value to present payment alternatives,” Panetta noted.
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The “stay safe at the intersection the confluence of big techs and global stablecoins” is a phrase used by EU regulators to promote a European Central Bank digital currency.
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