Facebook’s proposed cryptocurrency Libra may not be approved by regulators, but it may have set a precedent that could lead to the creation of a global currency.
According to the president of European think tank Centre for Economic Policy Research, Beatrice Weder di Mauro, the social media giant’s proposed cryptocurrency project sook the central banking community because it made it clear a private sector-backed global currency is a real possibility.
Weder di Mauro said, speaking to CNBC:
This is also why it's probably not going to happen, because there is, you know, the regulators are right now saying we are not going to allow it.
Facebook announced its cryptocurrency initiative back in June of this year, with the Libra being governed by a consortium that initially had over 27 members, although some like PayPal and Visa have already left the project.
Its CEO Mark Zuckerberg testified before the U.S. House Financial Services Committee this Wednesday, and made it clear Facebook wouldn’t be a part of the project if it didn’t receive regulatory approval.
According to Weder di Mauro, however Libra is threatening to central bankers as it’s a proposed international currency backed by a network of firms, and could be rolled out next year. Even if regulators stop it from happening, she said the world may still be ready for a global currency:
The probability of something like this happening, either from the private sector or because central banks actually get together and do something … is higher now. Central banks would be able to, if they banded together, to issue a global currency themselves
Weder di Mauro added this could be an improvement on the current international monetary system that’s largely dominated by the U.S. dollar.