September 20, 2020

ECB Executive Director: central banks need to beware of Libra

ECB Executive Director: central banks need to beware of Libra

Facebook's Libra cryptocurrency potentially solves a number of problems that exist on the international payment market. At that at the same time, a new development may create new problems, says the ECB Executive Director.

On Wednesday, Benoit Cure, a member of the Executive Board of the European Central Bank (ECB), said central banks and politicians should certainly be prepared for Libra.

He added that stablecoins, in particular the Libra cryptocurrency from Facebook, can help people who are not connected to the financial network to make cheaper and faster cross-border payments.

By simplifying access and the cross-border settlement process, the new development will help eliminate two key shortcomings in the existing market architecture.

Libra, which is supported by the social giantFacebook's networks are linked to a huge user base, giving it “truly global opportunities.” According to Cur, who is also the head of the G7 Stable Coins Committee, the central bank has a number of concerns regarding stablecoins, as they can be used to launder money and finance terrorism.

Stablecoins can have a significant impact onmonetary policy and financial stability, since coins are able to change the mechanism of money supply outside normal channels, while failure or loss of confidence can have systemic consequences.

There is a risk of violation of the monetary sovereignty of countries, said Cur.

In his opinion, new approaches are needed to regulate innovation, and regulation should be applied “in concert at the international level”.

In the comments, he said that the G7 group on stable coins will present its recommendations on this issue in time for the meeting of the IMF and the World Bank, which will be held on October 14-20.