EU Plans to Launch public cryptocurrency, according to a draft EU document, after Facebook’s plan to introduce a private one has met a hostile reaction from global regulators.
06 November 2019, AtoZMarkets – The social media company said in June that it plans to launch its Libra digital currency next year. But France and Germany said in September that it posed risks for the financial sector and supported the development of a free alternative.
EU Public Cryptocurrency
The draft text of the European Union, on Tuesday, also urges the bloc to develop a common approach cryptocurrency. That is possibly including the ban projects deemed too risky. In its current form, EU finance ministers could adopt the document next month. That would intensify the EU’s cryptocurrency regulatory campaign, which has so far been only partially regulated in individual EU States.
The ECB and other central banks in the EU could usefully explore the opportunities and challenges of central banks issuing digital currencies. That is including by considering concrete measures to this end, the project said. That is prepared by the Finnish Presidency of the EU and subject to possible amendments.
Digital currencies like Libra is also known as “stablecoins.” Those are usually backed by traditional money and other securities, while encrypted coins such as bitcoin coins are not. Both are cryptocurrencies. The draft text could be explained by EU finance ministers on Friday, according to the agenda of the meeting, with a view to its adoption at their next meeting on 5 December.
ECB’s Ambitious Vision
Benoit Coeure, a member of the ECB’s board of directors, said in September that the bank should step up. It is thinking on a public digital currency. An ECB official stated that, in its most ambitious version, the project could allow consumers to use electronic money. That would directly deposit at the ECB, without the need for bank accounts, financial intermediaries or counterparties.
They are all needed today to process digital payments. But may not be so if the ECB takes over, reducing transaction costs. But this raises technical challenges, and the banks’ opposition is likely. Until Facebook began its project in June, regulators had largely ignored stablecoins because of their small size. The most significant, Tether, is much lower than bitcoin. But the potentially massive reach of Libra, billions of Facebook users could use it. That scared regulators.
As part of a global campaign against Libra, the group of rich G7 countries said last month that the launch of stablecoins should not allow until the global risks. Under regulatory pressure, Libra lost a quarter of its original members, including Visa and Mastercard payment companies.
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