The European Central Bank should consider issuing its own public digital currency. This is stated in an EU draft report. The proposal is a response to the threat from Libra, Facebook’s private cryptocurrency.
Joint approach to cryptocurrencys
Facebook said in June that they are planning to launch Libra next year. But France and Germany said in September that this is a risk for the European financial sector. That is why these countries support the development of a public alternative.
Reuters reports that the European Union advocates a common approach to cryptocurrencys. Also consider the joint prohibition of risky projects.
The impact of the draft report should not be underestimated, in theory the proposal can already be adopted next month by the finance ministers of all member states.
It can be fast
The proposal was drafted during the Finnish EU Presidency:
“The ECB and other EU central banks could explore the opportunities and challenges of central bank issuance, including by considering concrete steps to that end.”
The draft text can already be discussed tomorrow by the finance ministers. If there is consensus, the proposal can already be converted into concrete actions on 5 December.
Deposit European crypto directly at ECB, without intermediary
Benoit Coeure is a member of the ECB’s board, in September he said that the bank should seriously consider a public digital currency. In its most ambitious form, consumers can use electronic money that can be deposited directly with the ECB, without bank accounts, financial intermediaries or other third parties.
At the moment these “intermediate steps” are still needed, but the ECB can take over this work, which also reduces the transaction costs.
For this, the ECB must invest a lot to be able to meet the technical challenges. And not unimportantly, every commercial bank will strongly resist this.
It is now time for action
Such a digital euro is actually just a stablecoin and until Libra came on the scene, regulators hardly spoke about this kind of cryptocurrency. The largest stablecoin is Tether, and it is much smaller than bitcoin.
But the billions of Libra’s reach has sharpened things up.
“We need at least a robust regulatory framework for dealing with virtual currencies,” said Markus Ferber, a German conservative who leads the largest group in EU parliament in the financial field.
“The EU Commission has been far too complacent so far. With Libra’s threat ahead, it is now time for action. “
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