On 26 July 2019, the European Central Bank (ECB) published a letter from its president, Mario Draghi, to Markus Ferber MEP.
In the letter Mr Draghi discusses how the European System of Central Banks (ESCB) is closely monitoring innovation in the financial sector, including stablecoin projects such as Facebook’s ‘Libra’. The ESCB also contributes to the ongoing work of the G7 working group on stablecoins. He notes that, as part of this group, the ESCB carries out a comprehensive assessment of the potential risks of stablecoin initiatives to financial stability, operational and cyber resilience, as well as their potential impact on the tasks of central banks, including ensuring the safety and efficiency of payment systems and the smooth conduct of monetary policy.
Mr Draghi states that stablecoin initiatives must ensure public trust by meeting the highest regulatory standards and be subject to prudent supervision and oversight. The ECB notes that, from a regulatory perspective, stablecoins, like any other emerging financial product, should be subject to the “same business, same risks, same rules” principle based on a comprehensive assessment of their functionalities. Mr Draghi contends that technology-neutral regulation not only prevents regulatory arbitrage but also helps avoid the risk of inadvertently constraining technological development.
The ESCB will pursue an internationally consistent approach together with the global central bank community and standard-setting bodies to ensure that there is a level playing field in light of stablecoins. The ESCB asserts that further engagement of stablecoin developers with the public and authorities is required to assess its considerations and any others that may arise.