The European Central Bank is leaning toward a “if you can’t beat them, join them” stance regarding digital currencies, recognizing shortcomings of the existing system and consumer demand for better solutions.
The bank will explore new technologies that could ensure safety for consumers, including a central bank digital currency, ECB board member Benoît Cœuré suggested in a speech this week.
“National providers in particular have not been able, or willing, to act in a pan-European manner. Twenty years after the introduction of the single currency, we still do not have a European card scheme,” Cœuré said.
“The Eurosystem therefore welcomes the strategic initiative of a number of major European banks to create a true pan-European retail payment solution that has the potential to meet the vision of our strategy.”
Cœuré also noted the “rapidly rising consumer demand for payment services that work across borders and that are also faster, cheaper and easier to use,” especially among younger people.
Such initiatives would address concerns by German and French officials that companies like Facebook are attempting to usurp government control of the global monetary system.
Both countries plan to block Facebook’s digital currency, called Libra, because “no private entity can claim monetary power, which is inherent to the sovereignty of nations,” according to a September statement.
“A central bank digital currency could ensure that citizens remain able to use central bank money even if cash is eventually no longer used,” Cœuré noted. “A digital currency of this sort could take a variety of forms, the benefits and costs of which the ECB and other central banks are currently investigating.”
Earlier this month, the Bank of International Settlements (BIS) picked Cœuré as the head of its Innovation Hub, working on issues of central bank digital currencies, stablecoins and digital payment innovations as well as other regulatory issues.
Back in September David Marcus, head of Calibra digital wallet initiative at Facebook, dismissed concerns that the digital currency would undermine national sovereignty over money. Libra, the borderless cryptocurrency that Calibra is aiming to launch, will be backed 1:1 by a basket of “strong currencies,” Marcus tweeted, so for it to survive “there must be the equivalent value in its reserve.”
- Facebook CEO Mark Zuckerberg, testifying before a U.S. Congressional committee in October, said Libra would not be launched anywhere in the world without approval from U.S. regulators. U.S. representatives expressed skepticism over Facebook’s stated aim of providing financial services to the world’s “unbanked” and worried that the stablecoin could enable money laundering.
Venezuela already launched its own cryptocurrency, the petro, and several national central banks, including those in Sweden, China and Uruguay, are working on issuing digital currencies.
