the European Central Bank (ECB).publishA report that analyzes the growth of the cryptocurrency market over the past decade. and risks arising from the existing financial system
part of the report The mention of stablecoins mentioned the important role in the current ecosystem, where stablecoins are increasingly used to link various blockchain networks and play an important role in delivering liquidity to the distributed financial ecosystem. Power (DeFi)
The report analyzes whether these stablecoins can be relevant to traditional financial systems. But it was concluded that the lack of regulatory oversight and the recent collapse of Terra’s Stablecoin Algorithm System (LUNA), now known as Terra Classic (LUNC), indicates that such impact could be devastating. financial system
“The largest stablecoin It serves an important role for the liquidity of the crypto asset market, which could have broad implications for the crypto asset market if one of the largest stablecoins fails.”
It wasn’t just stablecoin algorithms that faced a crisis during the crypto market crash in May, even stablecoin Tether (USDT) lost its peg for a while.
The ECB has also broken the idea of using stablecoins as a payment method. by claiming that it cannot actually be used due to speed and cost as well as the terms and conditions have proven that “Not enough for a really economical payment.”
The ECB has also introduced appropriate regulatory measures. This was to ensure that stablecoins would not pose a risk to financial stability in European countries. The expansion of stablecoins in the region is limited. Because payment providers in Europe Hasn’t played a huge role in the stablecoin market until now.
The post European Central Bank warns !! Terra’s mistake hints at stablecoin risks to financial stability appeared first on Bitcoin Addict.