The Chairman of Societe Generale warns that Europe could lose its position and needs to quickly accept stablecoins to avoid lagging behind in the global digital financial ecosystem.
Currently, 99% of global stablecoins are issued in the United States with the USD as the standard, while the euro is almost non-existent. Although the European Union has established a stringent legal framework, cultural apprehension and banking caution still hinder innovation in this field.
MAIN CONTENT
Europe risks being overwhelmed in the stablecoin sector, mainly due to U.S. dominance.
Three major misconceptions about stablecoins are affecting Europe's ability to develop.
The European Central Bank has a leading advantage but needs to change to avoid losing control.
What risks does Europe face by not developing stablecoins?
Lorenzo Bini Smaghi, Chairman of Societe Generale and former member of the Executive Board of the European Central Bank, emphasized that Europe could be pushed to the sidelines of the digital financial ecosystem if it does not quickly embrace stablecoins.
Currently, nearly all global stablecoins are issued by the United States and denominated in USD, leaving the euro almost absent in the emerging electronic finance sector. This could impact monetary sovereignty and Europe's economic role in the global market.
"Europe needs to overcome its fear and embrace stablecoins, or it will lose its voice in the future of global finance."
Lorenzo Bini Smaghi – Chairman of Societe Generale, 4/7/2023, Financial Times
What are the common misconceptions about stablecoins?
Bini Smaghi points out three major misconceptions hindering the development of stablecoins in Europe: underestimating the strategic value of tokenization technology; thinking that the global influence of stablecoins can be isolated; and not fully recognizing the negative impact on monetary sovereignty.
These three misconceptions are reducing the drive for innovation and investment from European banks, causing them to view stablecoins as more of a threat than a potential growth opportunity.
Will the MiCA legal framework help Europe effectively control stablecoins?
The European Union has enacted MiCA – the most comprehensive regulatory framework for cryptocurrency assets in the world, requiring stablecoin issuers to maintain 30% cash reserves and 70% high-rated government bonds to ensure liquidity and safety.
Despite this, European banks remain cautious about investing in stablecoins due to a risk-averse culture and apprehension towards innovation, making it difficult for the sector to leverage the advantages of MiCA to lead the digital financial trend.
What does the European Central Bank need to do to avoid falling behind?
The European Central Bank has the position and institutional capacity to lead in managing stablecoins. However, the executive board needs to change its approach, easing the notion of "over-regulation" to encourage innovation and protect monetary sovereignty more effectively.
From now until the end of the year, this decision is crucial for Europe to maintain its central role in global digital finance, avoiding domination by the U.S. or other economies.
"We are at a decisive moment: delays could completely lose the opportunity to control finance in the digital age."
European financial expert, 2023 report
Comparison of the legal framework for stablecoins between the United States and the EU
Criteria United States European Union (EU) Popularity stablecoin 99% of global stablecoins, using USD Almost no significant stablecoins, using euro is weak Legal framework No comprehensive federal law, centralized control Central Bank and SEC MiCA – comprehensive regulation requiring 30% cash and 70% safe bonds Development momentum The industry is developing, attracting more investors and innovators Banks are cautious, cultural reluctance to innovate Monetary sovereignty USD is the global standard currency, reinforcing U.S. position Risk of losing sovereignty if not innovative.
Frequently Asked Questions
What is a stablecoin?
Stablecoins are cryptocurrencies designed to have a stable value, often pegged to fiat currencies like the USD or euro to reduce volatility and facilitate payments.
What legal framework does Europe currently have for stablecoins?
The EU has enacted MiCA – detailed regulations requiring stablecoin issuers to maintain cash reserves and government bonds to enhance safety and transparency.
Why are European banks cautious about stablecoins?
Banks are wary of risks and innovation in a still-volatile new sector, viewing stablecoins as a competitive threat, which restricts investment and development momentum.
What can the European Central Bank do to lead in stablecoins?
Regulations should be relaxed to encourage innovation while protecting monetary sovereignty, leveraging institutional positions to shape the market.
How does Europe's failure to develop stablecoins affect the global economy?
This could lead Europe to lose control over digital finance, being dominated by the United States and diminishing its role in the global digital financial ecosystem.
Source: https://tintucbitcoin.com/chau-au-don-nhan-tien-on-dinh/
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