ECB President on Libra: Crypto Still “Limited” In Impact on Financial System
ECB President Not Too Worried About Crypto… Yet
Earlier this year, Facebook famously unveiled Libra to the world. The cryptocurrency project, billed as a way to empower billions, quickly became the talk of the town, with the phrases “Libra” and “Facebook’s crypto/blockchain” gracing the notifications of the phones of millions.
Unsurprisingly, central banks, governments, and traditional institutions were quick to take notice of this new entree into the fintech space. While some in the aforementioned group have embraced Libra with open arms — IBM, for instance, wants to help Facebook with blockchain — governments and their respective central banks are taking a cautious approach. As reported by this outlet previously, France and Germany have taken especially staunch approaches, with politicians recently announcing moves to stem the launch of alternative currencies in the Eurozone, aiming to preserve the monetary sovereignty of the Eurozone.
However, Mario Draghi, the president of the European Central Bank (ECB), doesn’t seem as concerned.
In a recent letter issued to a member of the European Parliament, the European monetary leader argued that “thus far, crypto assets and stablecoins have had limited implications [for monetary policy, the safety and efficiency of payments, and market infrastructures] and are not designed in ways that make them suitable substitutes for money”.
Draghi did, however, go on to admit that due to the “rapid pace of technological development”, his current assessment of cryptocurrencies and similar technologies “may be subject to change in the future”. He even stated that Libra could “have the potential for widespread adoption, both for retail and wholesale payments,” and should thus be properly addressed by the proper entities before it goes live.
A Threat to the Euro
Cathie Wood, the chief executive of portfolio manager/markets research firm ARK Invest, has argued that the move from European politicians to block Libra entirely may be one out of fear, fear of the collapse of fiat.
I expected emerging markets with vulnerable currencies to ban #crypto, but I did not expect the same from developed counties. Are France and Germany getting concerned about the long term viability of the #euro? Based on the implosion of their bank stocks, perhaps they should be. https://t.co/03oqCpcBlZ
Wood, who notably interviewed Elon Musk and got him to praise cryptocurrencies as the future, posed that as she didn’t expect for developed countries to ban cryptocurrency, the move to ban Libra might be one out of fear of the “long-term viability of the euro”. Wood cites the collapse of European bank stocks to prove her point.
Indeed, below is a chart of a European bank index, which shows that these financial institutions in aggregated are trading at levels not seen since 1993.