Head of the European Stability Mechanism: Stablecoins will threaten financial stability if they lack proper guarantees and management

A senior EU policymaker has stated that stablecoins, if lacking proper backing and regulation, could threaten financial stability. Pierre Gramegna, President of the European Stability Mechanism (ESM), stated in Washington on Wednesday that if stablecoins become mainstream and lack the same backing as central bank currencies, they could pose risks to the global financial system. He emphasized that he is not opposed to stablecoins, but that they must operate within a framework that protects the safety of consumers and financial participants. Furthermore, while Austrian National Bank President Martin Kocher believes stablecoins will not be as popular in the eurozone as they are elsewhere, Gramegna emphasized that the EU cannot be sidelined in the cryptocurrency space. Since 99% of stablecoins are denominated in US dollars, Europe would miss out if it fails to launch euro-denominated stablecoins. He also believes that cash, digital currencies, and stablecoins can coexist.