17 September 2019

ECB's Cœuré: Digital challenges to the international monetary and financial system

Although private digital forms of money have been around for decades, Facebook’s large installed customer base suggests that Libra could be the first private initiative to have a truly global footprint from day one. Facebook has over 2.4 billion users – more than a quarter of the world population. WhatsApp and Instagram, both owned by Facebook, have 1.6 billion and 1 billion users each.

Global “stablecoin” initiatives can make international payments cheaper and faster and support financial inclusion. But they raise formidable challenges across a broad range of policy domains: operational robustness, safety and soundness as payment systems, customer protection, risks to financial stability and monetary sovereignty, and, last but not least, data protection and compliance with anti-money laundering and terrorism financing rules.

Some public authorities already expressed strong concerns, suggesting that regulatory hurdles will be set very high for these initiatives to get off the ground. Partly in response to these concerns, a G7 working group has been mandated to examine global “stablecoins” in more detail.

The group is expected to provide policy recommendations to G7 Ministers and Governors by the time of the IMF-World Bank Annual Meetings in October this year. The Financial Stability Board has also started looking into the regulatory implications of these initiatives.

In his remarks Mr Cœuré discusses whether Libra, or similar global “stablecoin” initiatives, may be a contender for the Iron Throne of the dollar. He starts by discussing the factors that distinguish the discussion today from previous discussions.

Cœuré argues that, in specific circumstances, and if allowed to develop, private digital forms of money could challenge the supremacy of the US dollar more easily, and faster, than currencies issued by other sovereigns.

Yet, whatever faith awaits private digital money, they will likely change the international monetary and financial system in one way or another, either directly or by driving global central banks to innovate.

Mr Cœuré concludes that global “stablecoin” initiatives, such as Libra, will prove disruptive in one way or another. They are the natural result of rapid technological progress, globalisation and shifting consumer preferences.

He says: “But how we respond to these challenges is up to us. We can focus our efforts on ensuring that private payment systems will thrive in a space that respects our common global policy priorities. Or we can accelerate our own efforts to overcome the remaining weaknesses in global payment systems, safe in the belief that only public money can ultimately, and collectively, ensure a safe store of value, a credible unit of account and a stable means of payment. Or we can do both of these things, and create an environment in which market-based and public payment systems effectively complement each other, jointly shaping the payments universe in the 21st century.”

Full speech on ECB

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