ECB sees Libra Launch as a Threat to the Future of Fiat Currencies

Kataryna Habeliia November 27, 2020

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ECB (The European Central Bank) sees Libra launch as a threat to the future of fiat currencies

The emergence of Facebook’s Libra stablecoin may pose a threat to national currencies, the European Central Bank (ECB) believes. At a conference organized by the Bundesbank, a member of the governing council of the financial regulator Fabio Panetta said that Libra users will bear high credit and market risks, as well as liquidity risks, and the token issuance itself threatens “potential systemic consequences”, writes Finextra.

Panetta stressed that after the release of the social network’s stablecoin, which is scheduled for January 2021, the ECB will be forced to “reinvent sovereign money”.

“Libra could threaten monetary sovereignty. This may happen if the stablecoins issued by corporations replace fiat currencies as a means of payment, ” — the representative of the financial regulator emphasized.

Working on the issuing of the Digital Euro

He added that experiments are now underway to issue a digital euro. In particular, the compatibility of the new currency with the existing settlement services of the Central Bank is being checked, the relationship between DLT technologies and centralized systems is being studied. Among other things, the ECB is considering the use of dedicated payment blockchains with electronic identification and evaluating the functionality of hardware devices that could enable autonomous and confidential transactions.

Today, November 27, the Financial Times reported that Facebook may unveil its Libra cryptocurrency in January next year. However, this digital asset will initially be issued in a “limited format,” meaning only one stablecoin pegged to the US dollar will be presented. The release of the rest of the cryptocurrencies is possible in the future.

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