As speculation mounts about a possible 2021 launch for Facebook’s digital currency Libra, a senior European Central Bank (ECB) official has warned that: “What is at stake is nothing short of the future of money”.
Facebook’s Libra cryptocurrency is readying to launch as early as January, the Financial Times reported on Friday, citing three unidentified people involved in the project.
The Geneva-based Libra Association that will issue and govern Libra plans to launch a single digital coin backed by the dollar, a significant scaling back from its recently revised plans to issue a series of stablecoins backed by individual traditional currencies, as well as a token based on the currency-pegged stablecoins.
The news has alarmed central banks, which are currently at a minimum of two years out from creating their own digital alternatives.
ECB board member, Fabio Panetta, speaking at a Bundesbank-convened future of payments conference, recently, argued that the impending revolution in payments, “requires us to stand ready to reinvent sovereign money.”
Speaking directly to Facebook’s stablecoin strategy, Panetta warned: “Stablecoin users are likely to bear higher credit, market and liquidity risks, and the stablecoins themselves are vulnerable to runs, with potentially systemic implications.”
He said that the risks could be mitigated if the stablecoin issuer were able to invest its reserve assets in the form of risk-free deposits at the central bank, as this would eliminate the investment risks that ultimately fall on the shoulders of stablecoin holders.
“This would not be acceptable, however, as it would be tantamount to outsourcing the provision of central bank money.
