• According to ECB President Mario Draghi, stablecoins are assets, not currencies

  • “Stablecoins appear to be coins, but they are completely linked to a real currency,” Christine Lagarde explained.

    All cryptocurrencies, including stablecoins and speculative assets, “are not currencies at all,” according to Christine Lagarde, president of the European Central Bank.

    In an interview with World Economic Forum founder and executive chair Klaus Schwab on Sept. 1, Lagarde said that while cryptocurrencies “present themselves as currencies,” they are still assets that must be regulated and “supervised by asset regulators.” The ECB president claimed that fiat-pegged digital currencies were also considered assets under this definition.

    “Stablecoins masquerade as coins, but they are completely associated with an actual currency,” Lagarde explained. “For example, some of them claim that they can be used for transactions, but the value will be precisely aligned with the dollar.”

    She also stated that any projects that issue stablecoins should be required to fully back their assets with fiat:

    “That needs to be checked, supervised, and regulated so that consumers and users of those devices can be protected from future misrepresentation.” I believe that recent history has demonstrated that those reserve currencies were not always as readily available and liquid as they were intended to be.”

    Tether, the largest stablecoin issuer by market capitalization, may have been mentioned by Lagarde. As part of a settlement with the Office of the New York Attorney General, the company agreed to pay $18.5 million in damages and submit to periodic reporting of its reserves until 2023. The Office of the New York Attorney General claimed that the stablecoin issuer had misrepresented the degree to which its USDT tokens were backed by fiat collateral.

    Despite these apparent strong views on digital assets, Lagarde made it clear that the ECB intended to respond to its customers. She has previously criticized stablecoins and cryptocurrencies, but she has not ruled out the possibility of the ECB issuing its own digital currency. The ECB’s governing council announced in July that the investigation phase of a two-year digital euro project would begin.

    “It should be available if customers prefer to use digital currencies rather than banknotes and cash,” Lagarde said. “We should respond to that demand with a European-based solution that is secure, available, and has user-friendly terms that can be used as a payment method.”

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