- Executives of the Central Bank of Europe are more likely to issue a CBDC. This was confirmed at a recent meeting in Belgium.
- Facebook’s Libra would have boosted the growing interest of financial institutions to issue a CBDC.
Recent events in the cryptomarket go beyond bears and bulls. The world’s leading financial institutions are deliberating and charting routes to evaluate a possible issue of a CBDB (Central Bank Digital Coin). This has given rise to a race of digital coins that has its origin in one entity: Facebook Libra.
A meeting in Brussels of the European Central Bank (ECB) has announced further progress towards a common digital coin for all members of the union.
Effect of Facebook’s Libra on global financial institutions
After a report published by the European Union the last, it began to become apparent that Facebook Libra would have great obstacles in its way. The report recognizes that the pound is a risk to the economy. Some members of the community, have opined that, in fact, the European Union and other countries see a threat in Libra.
This seems to have been confirmed by the facts subsequent to the report. Today, Benoît Cœuré, Member of the Executive Board of the ECB, gave a speech on the European strategy towards the payments of tomorrow. In principle, it is designed to unify the online payment system at points-of-sale in the countries members of the Union.
In his speech, Cœuré admits that the European Union has been unable to establish, in more than 20 years, a unified payment system apart from the common currency, the Euro. Cœuré acknowledges that there are interesting initiatives to achieve this objective but said:
Relying exclusively on non-European and new ecosystems presents two risks, however.
The first refers to the legality, lack of testing and financial stability of some initiatives. For example, Facebook Libra. The second of the risks is the dependence on a global non-European player and the risk that this would have for the market of European payment systems. This could leave Europe vulnerable to third party decisions or even cyber attacks.
The strategy then contemplates solutions and initiatives that efficiently address these major risks. Giving priority to those that guarantee the cost-effectiveness, security and experience of European users. Above all, European sovereignty and identity. Cœuré concludes:
For example, a central bank digital currency could ensure that citizens remain able to use central bank money even if cash is eventually no longer used. 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, being mindful of their broader consequences on financial intermediation.
U.S. Federal Reserve closely follows CBDC competition
CNF reported recently, how a member of the U.S. Federal Reserve responded to U.S. Congress’ concerns about digital coins. In addition, Congress asked for information about the possibility of the United States issuing its own CBDC, the digital dollar.
In a letter to the legislature, Jerome Powell explained that while the Federal Reserve closely monitors the situation and development of digital assets, for now, they think the benefits of issuing a digital dollar are less than its disadvantages.
That would put the United States in an observer position, while China takes the lead in developing its digital coin. Although the announcement of the Digital Yuan began as the possible opening of a new era between the Asian giant and cryptospace, subsequent events have shown the opposite. China has increased its pressure on cryptocurrencies and the exchange platforms that trade with them.
This could be a strategy that gives an advantage to its own CBDC. An asset that, if it evolves well, could change the current state of the financial market in which the fiat currency of the United States prevails.
The race that has started Facebook Libra promises to have an interesting development while the prices of the cryptomarket recover slightly, at the time of publication, from the inclement bearish trend that has shook it.