Stablecoins with a clear governance framework may be hampered by the uncertainty of the lack of regulation, according to the European Central Bank (ECB).
Four major types of stablecoins outlined
On Aug. 29, the ECB released a new paper devoted to stablecoins, which it describes as digital units of value that are not a form of any specific currency but rather rely on a set of stabilization tools in order to minimize fluctuations in their price.
The ECB’s paper is called “In search for stability in crypto-assets: are stablecoins the solution?” and proposes a classification of stablecoins based on different key concepts used to keep their value stable. Specifically, the ECB outlined four major types of stablecoins including those specified as tokenized funds, off-chain collateralized stablecoins, on-chain collateralized stablecoins and algorithmic stablecoins.
54 stablecoins totally $4.8 billion in July 2019
According to the ECB’s data, there are at least 54 existing stablecoin projects, with 24 of them being operational. The total market capitalization of stablecoin initiatives almost tripled from €1.5 billion ($1.7 billion) in January 2018 to over €4.3 billion ($4.8 billion) in July 2019, while the average volume of stablecoin transactions was €13.5 billion per month within the period between January and July 2019.
Tokenized funds are the most popular stablecoin type, accounting for almost 97% of the monthly volume of all other stablecoin initiatives, according to the ECB.