04 / 11 / 2020 the two sides of the ( stable ) coin speech the two sides of the ( stable ) coin speech by fabio panetta, member of the executive board of the ecb, at il salone dei pagamenti frankfurt am main, 4 november 2020 the payments industry is undergoing a digital transformation, and this transformation is accelerating. we can now pay with cards that are stored in our mobile wallets, ready for a transaction to be initiated at the touch of a button. mobile payment apps allow us to easily pay or send money to friends. new services based on application programming interfaces, such as payment initiation services, are expanding consumers ’ choice of e - commerce payments. fintechs have sparked the latest wave of innovation. in a recent survey by the european system of central banks, over 200 new payment solutions were reported, of which more than one - third were provided by start - ups. new providers have progressively shifted their business models from fee - based to data - driven, where payment services are provided free of charge in exchange for personal data that offer deep insights into users ’ preferences. the global technology firms – the so - called big techs – are using this model to leverage their large customer base and expand in global markets. thanks to their global footprint, they are uniquely positioned to offer services in the area of global cross - border transactions, where current solutions are low quality and expensive. this is the backdrop against which stablecoins have emerged. they could be used by the big techs to offer innovative payment solutions that work both within and across national borders. while stablecoin initiatives are still in their infancy, they should be carefully analysed as they could radically transform the payments landscape. today, i will discuss the potential advantages and risks of stablecoins, and their implications for the payments market, the financial sector and the overall economy. i will then turn to the forward - looking policies that are needed to steer innovation towards welfare - enhancing outcomes. two sides of the same ( stable ) coin stablecoins are digital units of value designed to minimise fluctuations in their price against a reference currency or basket of currencies. [ 2 ] to this end, some stablecoin initiatives pledge to hold a reserve of state - issued currencies or other assets against which stablecoin holdings can be redeemed or exchanged. stablecoins became the subject of heated debate last year, after the technology giant facebook and its partners announced their own global stable

##coin, libra. https : / / www. ecb. europa. eu / press / key / date / 2020 / html / ecb. sp201104 ~ 7908460f0d. en. html 1 / 5 04 / 11 / 2020 the two sides of the ( stable ) coin global stablecoins are initiatives which aim to achieve a global footprint [ 3 ], without necessarily relying on existing payment schemes and clearing and settlement arrangements. for example, libra is an integrated construct that simultaneously encompasses a new settlement asset, a new payment rail and new end - user solutions. global stablecoins could drive further innovation in payments, responding to the need for cross - border payments and remittances that are more efficient and cheaper. indeed, the financial stability board has proposed a roadmap to enhance cross - border payments that recognises a role for sound global stablecoin arrangements. the flip side of stablecoins is the host of risks they can pose to our social and economic life. for example, data - driven models could pose a risk of misuse of personal information for commercial or other purposes, which could jeopardise privacy and competition and harm vulnerable groups. another concern is that wide acceptance of stablecoins offered by foreign companies would make european payments dependent on technologies designed and governed elsewhere. this could raise potential issues of traceability in the fight against money laundering, terrorist financing and tax evasion. it could also make the european payment system unfit to support our single market and single currency and vulnerable to external disruption, such as cyberattacks. risks to financial stability and monetary sovereignty other risks involve the monetary and financial system. in fact stablecoins, if widely adopted, could threaten financial stability and monetary sovereignty. as i mentioned earlier, stablecoin issuers often promise that their stablecoins can be converted into fiat currencies. but this promise generally differs significantly from the convertibility mechanism for bank deposits or e - money. in the case of bank deposits, one - to - one convertibility to the fiat currency is safeguarded by deposit insurance schemes and prudential regulation and supervision. the value and safety of e - money holdings are protected by the fact that e - money issuers must hold customer funds in custody by third parties. these safeguards may not apply to stablecoins, which are therefore vulnerable to runs. if the issuer does not guarantee a fixed value, the price of the