European Central Bank Executive Says that Facebook’s Libra Coin “Has Undoubtedly Been a Wakeup Call for Central Banks”
European Central Bank (ECB) executive believes Libra, Facebook’s proposed cryptocurrency, will likely solve many issues associated with the global payments market. In his speech addressed to the Bank for International Settlements (BIS), Mr. Benoit Coeure, Member of the Executive Board of the ECB stated that “the global payments system still faces two major challenges: access and cross-border retail payments. Globally, 1.7 billion adults remain outside the payments system, with no access to basic services, even though 1.1 billion of them have a mobile phone..”
Libra, which Facebook’s version of its own digital currency, will be instantly connected to over a billion users across the world, offering it a “truly global footprint” as stated by Coeure. He is also the Group of Seven (G7) Committee Head on stablecoins. Libra is considered one of the stablecoin initiatives backed by tech and financial conglomerates.
Coeure raises a few concerns about Libra and other stablecoins, stating they have serious implications with monetary and fiscal policies. The coins will likely impact the money supply outside traditional fiat currency and their decentralized nature prevents any central bank from having total control of their monetary system.
Bitcoin’s monetary system, for example, has had a fixed monetary system since it was initially created. We know in advance exactly how many Bitcoin will ever be created (21 million) and the amount of new Bitcoin that’s mined is controlled by the cryptocurrency’s algorithm – which is immutable and can never be hacked. In a fully decentralized system like Bitcoin, there is no one central authority that can regulate its monetary system.
Coeure believes that there are ways to regulate against money laundering and terrorist financing with decentralized cryptocurrencies, however, new approaches are required (ie. blockchain intelligence). In his speech, Coeure said that the G7 group overseeing stablecoins will offer its recommendations in October during the IMF-World Bank Annual Meetings.
“Depending on the jurisdiction, the risks that have been identified so far could be addressed by existing regulatory and supervisory regimes, with the fundamental approach being that regulatory answers should be consistent and the principle of “same business, same risks, same rules” should be rigorously applied,” said Coeure. He went on to say that “All things considered, Libra has undoubtedly been a wakeup call for central banks and policy makers. Global “stablecoin” initiatives are the natural result of rapid technological progress, globalisation and shifting consumer preferences. The demand for fast, reliable and cheap cross-border payments is bound to grow further in coming years. Policymakers and central banks should respond to these challenges.”
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