Traditional financial institutions initially showed resistance concerning the adoption of cryptocurrencies. However, some powerful institutions such as the IMF and the ECB now believe that sub-products such as stablecoins should be adopted as they bring benefits.
Christine Lagarde, the president of the European Central Bank (ECB), believes that the central bank should be ahead of the curve when it comes to the demand for stablecoins. According to an official tweet by the ECB quoting Lagarde, she stated: ‘My personal conviction on the issue of stable coins is that we better be ahead of the curve. There is clearly demand out there that we have to respond to.’
Stablecoins in the cryptocurrency sector are a type of digital assets that are pegged to a fiat currency and constantly maintaining their value. For traders, these assets are a great option when minimizing losses or keeping their assets in a low-volatility state. However, stablecoins have the opportunity to attract a new market of cryptocurrency investors who wish to protect their traditional money from the volatility of fiat currencies.
Three months ago, while Christine Lagarde’s main function was being the head of the International Monetary Fund (IMF), she stated that if nominated as the president of the ECB, she would dedicate her work to swiftly transforming the financial environment. ”In the case of new technologies – including digital currencies – that means being alert to risks in terms of financial stability, privacy or criminal activities, and ensuring appropriate regulation is in place to steer technology towards the public good. But it also means recognizing the wider social benefits from innovation and allowing them space to develop,” said Lagarde at the time.
Near the end of September, the IMF itself also stated that stablecoins would bring benefits to both regular and institutional clients. However, they believe that they would not come without risks. According to the organization, even banks and other traditional financial institutions could lose their power or roles as intermediaries as the world of cryptocurrencies is decentralized and requires no 3rd-party in most cases.
Nevertheless, the IMF believes that banks will not lose their role in the end because they would create competing products that could provide a ‘safer’ alternative to decentralized stablecoins.