Central banks will be using their own Central Bank Digital Currencies based on blockchain technology within three years. Chief economist Mark Cliffe from ING Bank predicts this in a video published by the bank itself. He motivates his point by mentioning Facebook’s Libra token. Facebook is supposedly planning to launch Libra next year.
Cliffe states that Facebook has put pressure on central banks by announcing their Libra currency. “I think we’ve already got some sense of urgency among the policy community”, he said about the pressure that’s on the central banks. Consequently central banks would need to launch their own Central Bank Digital Currencies (CBDC).
There are bright sides on this process. For example, a fully digital currency would allow banks to introduce more negative interest rates. People would be paying banks to put money on their accounts. “This would open up a whole new range of policy options [for the banking system]”, Cliffemight added. In addition banks will have more insight in money flows, which helps in anti-money laundering efforts and battling terrorism funding.
Libra a wake-up call for central banks
Last week European Central Bank board member Benoit Coeuré said in a meeting that Libra has been a wake-up call for central banks all around the world. Facebook has the reach with its existing customers and could become ‘the first to have a truly global footprint’ with its digital currency.
In a speech Coeuré did in July, he already highlighted the power of stablecoin on a blockchain. He claimed that a global stablecoin is faster and cheaper, and could spur competition in payment services and therefore lower costs. It could also include more people in the financial system, even though that of course remains dependent on regulations.
Central Bank Digital Currencies getting closer
Right now we’re seeing central banks and politicians respond to the plans for Facebook. However, there are already countries making moves into the territory of Central Bank Digital Currencies. For example, The Marshall Islands launches its own digital currency called Sovereign, which will be used alongside the US dollar. Additionally the Chinese Central Bank is planning its own digital currency. Reportedly this happens in November, even though these expectations were downplayed a bit later.
Germany and France has expressed plans to ban Libra in their countries. Even though they don’t like the power Facebook has with their dollar-backed Libra, the two countries aren’t unwilling to launch an European digital currency.
Also published on Medium.