The ECB has published an Occasional Paper entitled ‘In search for stability in crypto-assets: are stablecoins the solution?’. The paper describes the functioning of different types of stablecoins and proposes a taxonomy of stablecoin initiatives. These include tokenised funds, off-chain and on-chain collateralised stablecoins, and algorithmic stablecoins. The Paper stresses that different types of stablecoins feature a trade-off between the level of innovation involved in their stabilisation mechanism and the stability of their value in the currency of reference. The ECB concludes that, due to regulatory uncertainties, an uptake in the usage of stablecoins may require improvements to the governance of such initiatives, including procedures to update the smart contracts at the core of the initiative and a cyber-security framework.

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