Fabio Panetta of the executive board of the European Central Bank (ECB) has described the risk of Big Tech-issued stablecoins to the global financial system.
Given the massive footprint of Big Tech firms, the assets backing such stablecoins would increase to the point that traditional banks’ funding becomes more scarce and therefore more expensive, Panetta said in a speech Friday.
Banks may therefore resort to more expensive short-term sources of funding, while the increase of deposit holdings under the control of Big Tech would make banks’ deposit base more concentrated.
“Without proper regulation, these developments could amplify international shocks and undermine financial resilience globally,” Panetta said. “We could see risk-biased technological change, whereby the digitalization of finance favors business models that are riskier for the global economy.”
Central bank digital currencies (CBDCs) could thus represent “an anchor of stability” for digital finance, he added, highlighting the work being carried about by central banks into CBDCs that could be used by consumers and companies alongside cash.
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