European Regulators won’t Oppose Stablecoins but Double-Down on Libra Warning
Benoit Coeure, a French economist and executive director on the ECB, believes now is the time to step up the weight of regulation for digital currencies. As per Bloomberg, Coeure believes Bitcoin and other major FinTech innovations were being closely watched and allowed to unravel in their sandbox, but now with Libra, there is an elephant in the sandbox that requires immediate attention, October 17, 2019.
Year of Stablecoins
In just a few months, the narrative around stablecoins has evolved dramatically. In 2018, it was primarily a method of hedging volatility risk for traders and investors, and in 2019 its is developing into the base for efficient payment infrastructure.
On this note, Benoit Coeure seems to understand the gravity of the situation at hand. Libra could give 2.4 billion global users access to a free-flowing payment system with no border restrictive capital controls.
While Coeure holds a strong personal conviction that the future rests in central bank run stablecoins, he recommended an immediate plan of action to set the “highest regulatory standards” for these assets.
Central bankers and bureaucrats have played off crypto as a poor substitute for traditional money. Although their words haven’t survived the test of time, their future actions are what truly matters. This is financial innovation beyond anything we have witnessed since the removal of the gold standard, and arguably beyond that. If governments want to catch hold of this disruption and use it to their advantage, they need to act now.
Writing-Off Libra is Naive
To underestimate the power held by one of the largest technology companies in existence, as well as their numerous multi-billion dollar partners, would be a grave mistake.
Republican Senator M. Michael Rounds wrote an optimistic letter to Anchorage’s Nathan McCauley, commending the company – and their peers – for their devotion toward enhancing the global payment system despite the roadblocks. Needless to say, not every politician is vehemently opposed to Libra.
The real risk posed by Libra is that of data management, but this is of no real concern to global regulators. Their focus is on preventing free capital controls and ensuring Facebook cannot erode their monopoly over credit issuance and liquidity management.