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About a week after the President of the European Central Bank (ECB), Mario Draghi, blew Bitcoin and other cryptocurrencies out of the water, the key ECB official Francois Villeroy de Galhau declared that he actually prefers Stablecoins to cryptocurrencies.
It will be recalled that the President of the ECB, while answering a students question during the ECB Youth Dialogue last week, bashed Bitcoin and other cryptocurrencies, saying they are not real currencies. He supported his claim by comparing cryptocurrencies to a Euro. He argued that a Euro will always be a Euro, even in a month time because it is backed by ECB. Who is behind crypto coins? he asked rhetorically.
While the dust is yet to settle down, another prominent policymaker with the ECB made another statement about cryptocurrencies, and in particular, stablecoins.
During an interview in Paris earlier in the week, Francois Villeroy de Galhau, an ECB presidential front-runner, stated categorically that the central bank sees a more promising future in stablecoins, and not crypto coins such as Bitcoin.
It is vital to stress that stablecoins are essentially crypto coins as well; however, they are pegged or backed by an underlying asset such as a fiat currency. This backing serves more like a shield, protecting them from price volatility and manipulation as seen with crypto coins.
According to Villeroy, cryptocurrencies are created differently. Compared to the traditional volatile crypto coins, stablecoins are different from speculative virtual currencies such as Bitcoin, Ethereum and Ripple, and they show a more auspicious future.
He emphasized further that the Bank of France is, in fact, observing the stablecoin market with great interest; furthermore, the bank plans on employing stablecoin initiatives in the private sector. Villeroy opined that stablecoins would be used to facilitate transactions that involve tokenized securities or goods and services. Tokenization, as used here, involves the conversion of physical assets such as real estate and debt into smart contracts via blockchain technology.
As a matter of fact, Villeroy may be on track, as a French bank called Societe Generale recently put this initiative to test by converting bonds worth €100 million to digital tokens.
Even with more companies entering the crypto space, it is obvious the crypto market still has a lot to prove. And the blow to the world largest crypto coins last year is not doing any good. Although Bitcoin has recovered so much from the depth it fell last year, the chief crypto coin still has a lot of grounds to cover to regain its all-time high achieved late 2017. The virtual coin currently trades at over $8,000, a far cry from its price in late 2017 which was capped at about $20,000.