Stablecoins could siphon off euro zone bank deposits, ECB warns

FRANKFURT (Reuters) -Stablecoins could gully invaluable retail deposits distant from euro portion banks and immoderate tally connected a coin could ​have wide stableness implications for the planetary fiscal system, the European ‌Central Bank warned connected Monday.

Stablecoins, integer assets designed to support a unchangeable value, person been ‌growing successful popularity and their marketplace worth present exceeds $280 billion, a comparatively tiny fig but inactive notable due to the fact that issuers person been among the largest buyers of U.S. Treasuries.

They are intended arsenic a store of worth and to supply cross-border ⁠payments, but their existent ‌use is successful buying crypto assets, the ECB argued successful a Financial Stability Review article, adding that astir 80% ‍of each trades presently executed globally connected centralised crypto trading platforms impact stablecoins.

"Significant maturation successful stablecoins could origin retail deposit outflows, diminishing an important root of backing for banks ​and leaving them with much volatile backing overall," the ECB said.

But ‌the main hazard is posed by a imaginable capitalist tally since the 2 largest stablecoins fertile among the largest holders of U.S. Treasury bills and person plus reserves that are comparable to the apical 20 largest wealth marketplace funds.

"A tally connected these stablecoins could trigger a occurrence merchantability of their reserve assets, ⁠which could impact the functioning of U.S.​ Treasury markets," the ECB added.

Such ​runs could besides interaction the euro portion if a European Union entity and a third-country entity jointly contented a fungible stablecoin, ‍since EU regulations are ⁠tighter and investors are much apt to prime it for redemption.

"This could permission EU issuers with insufficient reserve assets nether the supervision of ⁠EU authorities to fulfil the combined redemption requests made by EU and non-EU token holders, ‌amplifying tally risks successful the EU," the ECB added.

(‌Reporting by Balazs KoranyiEditing by Gareth Jones)