Stablecoins and other types of tokenised private sector Money

Content

The growing importance of stablecoins and their role in the financial sector 
Classifying stablecoins in relation to other types of money 
Use cases for tokenised private sector money 
Stablecoins: a strategic opportunity for the European financial market 
Challenges and solutions 
Conclusion: what the future could hold

The financial world is currently grappling with the effect of stablecoins on the industry. Those in favour of stablecoins view them as a pioneering alternative for processing payment transactions with all the benefits of blockchain technology. Sceptics, on the other hand, believe they are putting existing types of money at risk. In light of the current political situation in the USA, which will no doubt make stablecoins more attractive, financial market participants, governments and supervisory bodies within Europe must realistically evaluate the state of the market and develop a strategic approach. 

As stablecoins increase in importance, blockchain-based bank accounts are being developed in parallel. These are being tested for processing payments by corporate clients and financial service providers, and are already in use in some cases. Blockchain based commercial bank money can, just like stablecoins, support integration of programmable payments and offer added value as compared to classic payment systems, all thanks to seamless integration into digital business processes.

The increasing relevance and the emerging areas of application for stablecoins and blockchain based bank accounts have prompted us to take a closer look at the different types of tokenised private sector money. After all, in addition to the opportunities, these developments also represent potential risks to the financial markets, the real economy and European sovereignty. Not to mention there are legal obstacles to be overcome by banks and other financial service providers if they are to exploit the potentials of blockchain based forms of money. These obstacles are a detriment to Europe’s ability to compete on the global stage. The Association of German Banks has published this discussion paper to contribute to this important debate and highlight specific plans of action.