Daily Management Review

A Digital Currency Could Be Launched By The EU As A Counter To Facebook’s Libra


A Digital Currency Could Be Launched By The EU As A Counter To Facebook’s Libra
A public digital currency could be issued by the European Central Bank (ECB), claimed reports citing information from a draft document of the central bank. According to analysts, the ECB is contemplating this move as a counter measure to counter the potential impact on the financial markets by the planned launch of the stable coin developed by Facebook called Libra.
A common regulatory framework aimed at crypto currencies could be created by the European Union and it could even ban those projects that it regards as “high-risk” according to a draft text prepared by the Finnish EU presidency.
Libra tops the list prepared by the ECB to identify those crypto projects that are perilous. Back in June, its plan of launching the crypto currency was made by Facebook. However, lawmakers as well as regulators in several countries have expressed opposition to the project. Citing the high possibility that Facebook’s digital currency could cause havoc in the financial markets and reduce the influence of the ECB, France and Germany were among the first countries to express stiff opposition to the project.
According to reports, the text of the draft prepared by the ECB chair also suggested at the creation of a digital currency that would be based on strong legal grounds unlike KLibra and Bitcoin, in addition proposing the creation of a common crypto regulatory framework.
“The ECB and other EU central banks could usefully explore the opportunities as well as challenges of issuing central bank digital currencies including by considering concrete steps to this effect,” read the document according to the reports. .
The draft is likely to be discussed between the finance ministers of the European Union member countries next week. If they agree on the proposal, it can be adopted at the next meeting of the ministers on December 5.
Excerpts of the draft was published by Reuters which showed that currently the EU is only considering the possibilities of the launch of its own digital currency but there are also indications that the idea could be translated into action soon.
One of the aims of the ECB pushing to launch its own digital currency is to gain more control over the flow of money. Consumers could be empowered to use electronic money that would be deposited directly at the central bank, according to some reports quoting an ECB official. This would reduce the need for banking intermediaries.
The banks’ functions could be taken over by the ECB by managing digital payments at low costs without the existence of banking accounts and banking intermediaries. But it can be safely assumed that such a scenario would be opposed by banks and therefore ultimately the “digital euro” would look quite different from this initial ambitious version of the digital currency plan of the central bank. .
According to analysts, this stance of the ECB is in stark contrast of position about digital currency that it had taken in 2018 if it eventually actually comes out with a digital currency of its own. There was no need for digital currency, former ECB President Mario Draghi had said last year.