Euro Stablecoin Settlement Accounts Allowed at the ECB

In January the European Central Bank made an announcement about stablecoins which led to some readers believing it had said stablecoin issuers would be able to back euro stablecoins with central bank reserves. A paper by the Bretton Woods Committee, while literally correct in what it said, also added to this misunderstanding. A clarification was issued.

What the ECB said was that non-bank payment service providers (NB PSPs) would be allowed to access the TARGET payment systems and have central bank accounts. But the ECB does not accept that a stablecoin backed by central bank reserves that settles in central bank money would effectively serve as the safest possible form of digital currency.

The ECB was quite specific about the goals of allowing NB PSPs to get central bank accounts. It’s about the more efficient settlement of payments, not safeguarding assets. Stablecoin holders might be able to use central bank accounts for the purpose of on- and off-ramping funds via commercial banks, but not for holding the bulk of their stablecoin reserves.