Facebook's Libra is a "wake-up call" for policymakers and will require significant work before approval can be granted, according to a top European central banker.
Benoît Cœuré, a member of the executive board of the European Central Bank, said in a speech in the German Bundestag, that while "stablecoin" projects like Libra addressed the important need of greater access to cross-border payments, they raised "formidable challenges" across a range of policy domains.
Cœuré said that 1.7 billion adults remain outside the payments system with no access to basic services, even though 1.1 billion of them owned mobile phones and one in four had internet access. He added:
Cross-border retail payments are vital for global commerce and for migrants who send remittances home, but are generally slower, more expensive and more opaque than domestic payments. Sadly, the cost of cross-border remittances imposes the greatest burden on those who are least able to bear it.
He acknowledged that initiative such as Libra addressed these failings and had access to large networks of existing users, suggesting they could be the first to have a truly global footprint.
However, formidable challenges - particularly risks related to anti-money laundering and other financial crime, as well as consumer and data protection, competition and tax compliance - remained a priority for central bankers and global regulators.
He also addressed possible risk to financial stability, saying that if stablecoins become widely used and act as a substitute for fiat currency, monetary sovereignty risked being infringed and the transmission of monetary policy could be affected.
Despite jurisdictional differences, Cœuré insisted regulatory answers must be internationally consistent, applying the principle of "same business, same risks, same rules". He concluded:
Libra has undoubtedly been a wake-up call for central banks and policymakers. Global "stablecoin" initiatives are the natural result of rapid technological progress, globalisation and shifting consumer preferences. The demand for fast, reliable and cheap cross-border payments is bound to grow further in coming years. Policymakers and central banks should respond to these challenges.
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