The European Central Bank (ECB) says stablecoins that entail a liability on an identifiable entity should be subject "to existing regulatory standards."
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In a recently published report, the ECB claims the term "stablecoin" can only be stable only through appropriate "design and effective risk management." The regulator also proposes to change the term so that potential buyers of the asset will not be misled.
"As regulatory principles are established and approaches are defined, the term «stablecoin» should be replaced by a choice of terminology to shift the emphasis away from the issuer’s promise of stability," the ECB said.
The regulator highlights that the Eurosystem has a wide range of tools to regulate the impact of stablecoins on its mandate and tasks. For financial institutions to join the development of the digital asset industry, they must establish an appropriate risk management structure commensurate with their role in stablecoin agreements, the ECB added.
iHodl earlier reported that the US Office of the Comptroller of the Currency (OCC) allow the US bank to keep reserves on behalf of stablecoin issuers.
However, a national bank, according to the OCC, should provide "appropriate disclosures" regarding deposit insurance coverage.
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