The European Central Bank (ECB), in their latest hearing of Benoît Cœuré organized by the committee on the Digital Agenda on the topic of Digital currencies majorly focused on Facebook Libra. The testimony of Cœuré, Member of the Executive Board of the ECB, contained useful information as to the importance of a payment system like Libra and other similar initiatives, collectively known as
Facebook Libra And Stablecoins Initiative Designed To Solve Pertinent Issues
According to the report of the testimony, the current financial policies surrounding traditional banks are being disrupted from all sides. First, by tech start-ups and then by big tech firms that have a substantial digital footprint, whose business propositions have been so far based on non-financial activities.
Furthermore, as the traditional financial systems undergo active technological advancement, major problems are yet to be addressed; access and cross-boarder retail payments. It is on this premise that payment systems Libra was said to be of major importance.
The testimony of Cœuré expressed the fact that while stablecoins are specifically designed to fulfil one more of the problems described, Libra was designed to efficiently solve those pertinent issues. According to the report,
“A number of so-called “stablecoin” initiatives, backed by large technology or financial firms and built on blockchain technology, are designed to address at least one and, in the case of Libra, both of these failings. Although private digital forms of money have been around for decades, these new initiatives have access to large networks of existing users and customers, which suggests that they could be the first to have a truly global footprint.”
Problems Posed By Libra And Similar Currencies
However, there are major concerns around the adoption of Libra and other stablecoins initiatives. According to the hearing, stablecoins maintain substantial challenges across a broad range of policy domains. Top consideration issues include the possibilities of money laundering and financing of terrorism. Also, consumer and data protection, cyber resilience, fair competition and tax compliance. According to the hearing,
These initiatives raise formidable challenges across a broad range of policy domains. Of particular concern are the risks related to anti-money laundering and countering the financing of terrorism, as well as consumer and data protection, cyber resilience, fair competition and tax compliance.
Regulatory Effort To Globally Adopt Stablecoins
The committee further discussed regulatory procedure necessary to improve the adoption and use of Libra and other stablecoins initiatives. According to the hearing, in response to these concerns, an active group has been delegated by G7 finance ministers and central bank governors in order to examine global “stablecoins” into details.
The group is also expected to design and present policy recommendations during the IMF-World Bank Annual Meetings in October this year. The Financial Stability Board has also started looking into the regulatory implications of these initiatives and is expected to report to G20 ministers and governors.
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