WHY THIS MATTERS IN BRIEF
Increasingly nation states are worried that Stablecoins will privatise money, in the hands of companies, and reduce or eliminate the state’s control of money and fiat currencies.
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As we watch companies like Walmart and Amazon think about rolling out their own private Stablecoin networks and currencies Lagarde stated that the rise of stablecoin adoption has introduced other risks as it weakens sovereignty and reduces the ability to conduct monetary policy. She emphasized that, as they currently stand, stablecoins should not be treated as money.
The rise in stablecoin adoption is concerning central banks, which now face competition from these new tools that rival their fiat counterparts. Christine Lagarde, President of the European Central Bank (ECB), has warned about the drawbacks of the increased use of stablecoins and their role as money.
The Future of Money and Banking, by Keynote Matthew Griffin
On Tuesday, during a central bank’s meeting in Portugal, Lagarde touched on the subject, reinforcing that these tools shouldn’t be considered money. She stated:
I think that we are falling prey to some confusion between money, means of payment, and payment infrastructure, and that is accelerated or emphasized as a result of the technology that is being used, and some technologies in particular.
Lagarde also referred to the fact that stablecoins are issued by private companies, like Circle and Tether, and that this clashed with her conception of money as a “public good.”
“My fear is that that blurring of the lines I mentioned earlier is likely to lead to a privatization of money. I don’t think that this is the purpose for which we’ve been appointed to do the job that we have, nor is it good for this public good that is money,” she asserted.
She also stressed that the introduction of stablecoins might undermine the capacity of central banks to apply effective monetary policy, as these are often used as proxies for their fiat counterparts.
Lagarde and the European Central Bank have promoted the digital euro, the upcoming European Central Bank Digital Currency (CBDC), as a tool that would both ease the use of digital payments and protect European sovereignty. In June, Lagarde noted that, pending regulatory approval, the digital euro was ready to be launched soon.
