French economist and ECB council member Benoît CÅ“uré today released remarks at an event organised by the Committee on the Digital Agenda on the topic of “Digital currencies, focusing on Libra” today.
There was one interesting statistic thrown up in the initial remarks. “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 and one in four also have internet access” according to the World Bank, 2018. That makes a massive case for ease of access for Facebook’s Libra.
Mr CÅ“uré then proceeds to speak about stablecoins and how they could be used for money laundering and funding terrorist activities…. Like traditional fiat currencies don’t have the same problem. He then adds:
“Stablecoin” initiatives also need to demonstrate a sound legal basis. The global nature of these initiatives means that potential conflicts of laws across jurisdictions need to be addressed. Ambiguity can make “stablecoin” arrangements vulnerable to a loss of confidence.
The fact is for me none of the digital currencies would have been created if there was confidence in traditional banking. Then we get to the real issue….
If “stablecoins” become widely used, they could also give rise to issues related to monetary policy transmission and financial stability (CÅ“uré, 2019b). Where a “stablecoin” acts as a substitute for fiat currency, there may be the risk of the monetary sovereignty of countries being infringed.
Now, this is ECB code to say – The money cannot be controlled. AAAHHH!! what if we cannot add to QE? (print more money) or collect taxes or buy more corporate bonds!!. He finishes off by saying:
All things considered, Libra has undoubtedly been a wakeup call for central banks and policymakers. 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.
So he believes that technological advances are to blame for the rapid rise in stablecoins like Libra and not government and central bank confidence. In the interest of open and fairness here is a link to the speech (Link). The French and German government have already voiced concerns over Libra in the past and now the ECB have voiced their concerns once again. Either way, I am not sure they can do too much to stop it as Facebook plans to launch next year anyway regardless.
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