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ECB Board Member Benoit Coeure has warned that private stablecoins like Libra are posing big risk to the monetary sovereignty, however, they can also solve some of the burning issues.
Speaking to the German federal parliament Bundestag on Wednesday, Benoit Coeure, a member of the Executive Board of the European Central Bank (ECB) said that Facebook’s currency Libra could possibly fix some of the troubling issues that exist at the international payments market. However, he warned that, on the other hand, it might create other problems that will need regulators to act more liberal and creative. He said:
“Libra has undoubtedly been a wakeup call for central banks and policymaker, and they should respond to these challenges.”
Coeure seems to agree with Libra’s CEO David Marcus in his claims that Libra is created with the focus to help unbanked. Coeure commented that stablecoins, especially Libra, could help connect the 1.7 billion people in the world who are now “off the financial grid”. In the same time, that kind of stablecoin, thinks Coeure, could make cross-border payments much cheaper, efficiently faster and overall more transparent.
Stablecoins could, thinks Coeure, label two major defects of the market, in order to optimize access and ease cross-border retail payments. The fact is that Libra will be, through Facebook’s network, connected to a huge user base and Coeure thinks this could leave a “truly global footprint”.
Coeure, who chairs the Committee on Payments and Market Infrastructures at the Bank for International Settlements and is also the head of the Group of Seven (G7) Committee on stablecoins raised numerous concerns regarding exactly stablecoins including the ones about money laundering and terrorist financing.
On the other hand, he noted that there are plenty of possibilities of consumer protection, data security, network stability, competition and taxation issues.
Stablecoins, thinks Coeure, have serious “innuendos” for monetary policy and the stability of the financial system while they can influence money supply outside the traditional channels. Failure of the guaranteed peg or the loss of customer’s confidence could, on the other hand, have systemic inferences. He said:
“There may be the risk of the monetary sovereignty of countries being infringed.”
Coeure stressed that even though he believes a lot of things can be made in order to regulate the new products within existing policy frameworks, new approaches are urgently needed. He added that rules need to be put in an “internationally consistent” manner, saying that there should be a certain degree of coordination between institutions globally.
He also commented that the G7 group on stablecoins will give their advisory comments and recommendations in time for the IMF-World Bank meeting that is happening Oct. 14-20.
In one of his last interviews, Facebook’s CEO Mark Zuckerberg said they are doing anything they can to launch project Libra on time. He said:
“A lot of people have had questions and concerns, and we’re committed to making sure that we work through all of those before moving forward. Obviously we want to move forward at some point soon [and] not have this take many years to roll out. But right now I’m really focused on making sure that we do this well.”
With the consortium struggling to receive the approval of regulators worldwide to launch the crypto asset, support from influential voices as is Coeure means a lot.