The European Central Bank has come out in support of stablecoins as a medium to transact and trade over the blockchain. Bitcoin, they say, is too volatile to be used as a medium of exchange nations and institutions. Francois Villeroy de Galhau spoke to Bloomberg on May 15th and was adamant that stablecoins could play an important role in the current financial system which is looking more and more to blockchain to alleviate pressures put on it by an economy that is decades ahead of the payment systems that are currently in use.
Fear rears its ugly head
What is not understood is often feared, as the old saying goes. Bitcoins all too sudden spike in value over the last seven days, from around $5000 to the current price of just over $8000, came about so unexpectedly that it has left many economists and financial thinkers in the dust.
The two days, two thousand dollar rally upwards was not predicted by any indicators currently available to analysts, along with the fact that no single event was responsible for the current upswing. It just rose, with no rhyme or reason behind it – except for volatile market forces and people simply Bitcoin (BTC) trading.
The inverse is also true. The same volatility and drastic dips are prevalent when a cryptocurrency is losing value, which makes this form of digital asset extremely unstable for trade and finance. The ECB President Mario Draghi recently said that unbacked cryptocurrencies were simply not real money. That is all well and good, but de Galhau has been making more sense with his remarks. While acknowledging that blockchain and tokenizing assets were a giant leap forward in terms of the financial markets, traditional cryptocurrencies were simply not mature enough to be used at this point in time.
Financial institutions are embracing blockchain
The number of financial institutions that are joining the blockchain revolution is greater every day. While a central bank looking to buy bitcoins is still some time off in the future, the underlying technology is definitely becoming a popular topic in board rooms around the world.
One landmark event that has truly shown how far blockchain technology has come is the transfer of value between the Central Bank of Canada (CBC) and the Monetary Authority of Singapore (MAS). They recently exchange digital currencies via the blockchain to settle payments. This is the first time since this new technology was conceived that two such important players on the world stage, central banks no less, has transacted completely digitally.
The transaction as supported by JP Morgan Chase & Co. Of Manhatten who have also been quick to embrace blockchain technology themselves. Their own JPM Coin was created in part to help larger institutions settle payments using blockchain. JPM Coin being a lot less volatile than traditional cryptocurrencies has helped alleviate many of the fears that come with settling payments via blockchain technology.
The Iran Central Bank (ICB) has even gotten in on the act. They are creating their own digital currency using their own blockchain technology to help with payment settlement in the country.