What Roles Should Central Banks Have Launching Stablecoins Like Libra?
Ever since the vision for a Libra stablecoin was unveiled in its white paper back in June, Facebook has suffered a startling backlash from countries around the world. Some American politicians have claimed the digital currency has the potential to be more dangerous than 9/11. Lawmakers over in Europe haven’t been too kind either, with Germany’s finance minister warning he is “very, very skeptical” about the project.
The main bone of contention with Libra has been the notion of a private company creating a currency designed to rival the likes of the dollar and the pound. Critics fear it would undermine national sovereignty and economic stability — and given how Facebook has been embroiled in scandals in the past, others question whether Mark Zuckerberg’s social network is fit and proper to hold such a responsibility.
Nonetheless, there’s one thing that few can deny: The march toward digital currencies is well and truly underway. Just look at the People’s Bank of China, which has been furiously researching and developing such a financial asset that it can call its own. Although officials in Beijing have said the elusive project has no definitive timetable, speculation has been rife that the digital currency aims to directly compete with Facebook by beating them to launch. This has led analysts to warn that resistance to Libra could cause the yuan-backed asset to achieve dominance in emerging economies, with some politicians urging the U.S. to lead from the front.
David Marcus, the head of Facebook’s Calibra wallet, insists the project is not in jeopardy despite the likes of PayPal, Visa, Mastercard, Stripe and eBay leaving the Libra Association. That said, reports have suggested that Facebook potentially oversold the extent to which regulators were on board with the project. But what do central banks think of stablecoins such as Libra, and could they play a prominent role in helping them launch and thrive?
Banking on support
As things stand right now, the biggest hurdle standing in the way of Libra and stablecoins like it is the fragmented regulatory landscape. While some central banks appear to be embracing such projects with open arms, others believe there are fatal legal and regulatory issues in the way.
Take a look at Mark Carney, the governor of the Bank of England. He has been surprisingly optimistic about Libra — and has even defended Facebook’s decision to pursue creating a new cryptocurrency. He believes the social network was inspired to act because of imperfections in the traditional financial system — shortcomings that mean remittances are expensive for foreign workers to send back home, and cross-border payments are unacceptably slow. However, Carney does believe that adequate levels of regulation, oversight and accountability are required — and such projects shouldn’t be allowed to launch until such protections are in place.
The Bank of England has gone some way to getting the ball rolling. A document recently issued by the United Kingdom’s central bank said Libra has the potential to become “a systematically important payment system” — and urged regulators to embrace terms of engagement to help support innovative platforms prior to launch.
So, promising noises from the U.K. on Libra. But just look at how this contrasts with attitudes in the European Union — the self-same trading bloc that Britain is looking to leave as soon as Oct. 31. France has been nothing short of resolute in its stance against the stablecoin, with Finance Minister Bruno Le Maire warning that Libra’s development cannot be authorized on European soil.
It doesn’t take a genius to figure out that such vastly different opinions about digital currencies, and new technologies in general, can be disastrous for the economy, for consumers, and for the businesses who are attempting to innovate. Unity, cohesion and consistency are going to be the secret ingredients for ensuring that stablecoins can be compliant and rolled out at scale — and scale is important because of how it helps reduce costs for hard-pressed end users.
The best way to move forward, and to understand the nuances of the issues at hand, is to hear the perspectives of the brightest and best in the industry — establishing new connections and engaging in debates about the best ways to dismantle the hurdles that lie ahead.
Organizers at the Crypto Finance Conference say they are trying to achieve exactly this, delivering an exclusive crypto finance and blockchain conference for investors that enables meaningful connections to be established. Taking place in the Swiss resort of St. Moritz from Jan. 15–17, the event blends top-flight speakers with generous amounts of time to network and build new contacts.
The program is continuing to evolve, but already, discussions about the critical role for stablecoins in financial inclusion — as well as the evolution of central banking and tales from the frontline of global regulation — are on the agenda. With so many question marks looming over the future of ambitious projects such as Libra, it is events like these that could help to secure some much-needed answers.
By Connor Blenkinsop