Facebook’s Libra could potentially solve some of the problems that have plagued the international payments market for years now, but it might also create others if the regulators don’t get creative. This is according to a European Central banker who was speaking to German federal parliament Bundestag on September 25.
Wakeup call to Central banks and Regulators
ECB banker Benoit Coeure said that Facebook’s Libra was no doubt a wakeup call to central banks and policy makers, and both of those parties should respond to the challenges accordingly. He added that Stablecoins particularly the Libra, had the potential to connect 1.7 Billion people globally who are now off the financial grid, while also making cross-border payments cheaper, faster and more efficient. In improving access and cross-border retail payments processing, Libra could address two key challenges that the current market systems have not addressed.
Libra’s potential Global Footprint
Libra which is supported by a consortium led by Facebook will be connected to a huge existing user base, which gives it a true global footprint according to Coeure. Benoit Coeure who is the chair of the committee on payments and market infrastructures at the Bank for international settlements, and also head of the Group of Seven (G7) committee on Stablecoins; raises some concerns about Stablecoins.
He is of the opinion that Stablecoins like Libra can become viable tools for money laundering and international terrorism. He also adds that Stablecoins could just disrupt financial stability and monetary policy, since they could affect money supply outside the normal channels. He also seemed to second the positions taken by the finance Ministries in France and Germany about possible infringement of local currencies.
“There may be the risk of the monetary sovereignty of countries being infringed,”
Call for Regulation
While he believes that a lot can be done to regulate Stablecoins within the existing policy frameworks, he also advocates for new moves to be made. He believes new rules need to be applied in a globally consistent manner. His comments come at a time when Facebook’s Libra is facing increased scrutiny from the U.S Congress due to fears that it might outdo the U.S dollar, while also facing open hostility from France, Germany, and China.