European Central Bank Becomes Flexible in Its Position on Cryptocurrencies
The rapid development of cryptocurrencies could modify current ECB’s position on the issue. The ECB continues to assess the relevance of a European stablecoin pegged to the euro.
The president of the European Central Bank (ECB), Mario Draghi, adopted a criterion of greater openness toward cryptocurrencies than that shown so far by the authorities in Europe. This is clear from the views expressed by the senior official in a letter sent to the Member of the European Parliament (MEP) Eva Kaili.
In the missive, dated September 26th, 2019, Draghi said that the European System of Central Banks (ESCB) is assessing cryptocurrencies and stablecoins (tokens pegged to the price of other assets). This is part of an effort to consider the implications of these financial technologies in monetary policy, as well as in the security and efficiency of payments. However, he acknowledged the future potential of cryptocurrencies as a means of payment.
Draghi believes that until now stablecoins and cryptocurrencies have had limited implications in these areas and are not designed to be suitable substitutes for fiat money. However, he considers that, given the rapid pace of technological development and the evolution of the business model, this evaluation may be subject to changes in the future.
In mid-September there was a worldwide meeting of central banks, attended by representatives of Facebook’s stablecoin project Libra. The emissaries for this and other projects that include collateralized tokens of global circulation answered the doubts expressed by the officials of 28 central banks present at the meeting.
The information disclosed at that time showed the concern that financial regulators feel about the possible risks of stablecoins such as Libra to financial stability.
Benoît Cœuré, Chairman of the Committee on Payments and Market Infrastructures (CPMI) and convener of the meeting, had stated in a previous forum that the Libra cryptocurrency was a “call to attention” for the ECB. Even at a previous worldwide meeting of finance ministers, the representative of France, Bruno Le Maire, had stressed that Libra cannot be allowed to operate in Europe.
In his letter Draghi mentioned Facebook’s stablecoin project Libra, but with rather a different tone. He said that Libra could have a global adoption potential for retail and wholesale payments. Besides, he stressed that the project is receiving the support of large technology companies.
Moreover, he mentioned that the ESCB is cooperating with its peers in the G7 stablecoins working group. There they have acknowledged that it necessary to optimize the current system of cross-border payments and the access to payment services. In this sense, he reiterated that the association continues reflecting on the pros and cons of issuing a “digital form of the euro,” that is, a stablecoin supported by the European Union currency that is available to the general public.
In the opinion of the European Central Bank, the key issue for a digital currency of that financial institution is not technology but its usefulness in terms of costs and benefits to the public. Draghi mentioned that regulatory, systemic and political issues should be addressed before advancing any potentially global initiative, such as stablecoins.
By Willmen Blanco