ECB must work very hard on digital euro, German finance minister reacts to today’s news about the launch of Libra stablecoin
Today’s news that the first stablecoin of the Libra association may be launched as early as January next year has worried the central bank of Europe.
Today, there was a Bundesbank-convened future of payments conference where several members of the ECB’s Board of Directors spoke. The first to make an important speech was ECB board member Fabio Panetta, who drew attention to the impending revolution in payments and also to leaked information about the launch of the first Libra stablecoin.
In the context of stablecoin under the leadership of Facebook, Fabio Panetta stated:
Stablecoin users are likely to bear higher credit, market and liquidity risks, and the stablecoins themselves are vulnerable to runs, with potentially systemic implications.
Fabio sees a way where the risks can be mitigated, if the stablecoin issuer would be able to invest in its reserve assets in the form of risk-free deposits at the central bank. This would eliminate the investment risks that ultimately fall on the shoulders of stablecoin holders.
However, this method could jeopardize the monetary sovereignty of the central bank and says:
This would not be acceptable, however, as it would be tantamount to outsourcing the provision of central bank money,” Panetta states. “It could endanger monetary sovereignty if, as a result, private money – the stablecoin – were to largely displace sovereign money as a means of payment. Money would then be reduced to a ‘club good’ offered in return for the payment of a fee or membership of a platform.
According to the daily Finextra, central banks are currently for at least two years from the creation of their own digital currencies, so they are rightly concerned about the information that Libra plans to launch the first stablecoin as early as January next year.
During this conference, German Finance Minister Olaf Scholz also spoke, calling on the community of central banks to increase the pace of work on the digital euro and saying:
On the digital euro, I think we should work very hard. It is nothing where we should wait and see,” Scholz remarks. “(We) should be able to decide at any time that now we should do something with a digital euro.
Recall the most important findings that may have worried ECB officials. The first Libra stablecoin should be covered by the dollar, the exact launch date currently depends on the payment services license from FINMA, but estimates suggest a possible grant as early as January 2021.
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