Benoît Cœuré, executive board member of the European Central Bank, has told the German Bundestag that stablecoins like Facebook’s Libra initiative come with both risks and opportunities.
He made the remarks on Wednesday September 25. Cœuré commented that the “global payments system still faces two major challenges: access and cross-border retail payments.”
He noted that 1.7 billion people still do not have access to payments systems and that cross-border transactions are still sluggish and expensive.
Cœuré acknowledged that stablecoins, which are designed to be minimize volatility and that can be tied up to either commodities or fiat money, could help solve these issues. While digital money has been around for decades, the ECB top stated this was the first time that they could “have a truly global footprint.”
Yet, Cœuré believed they still raise massive challenges in terms of the risks of anti-money laundering, terrorism financing, consumer and data protection, cyber resilience, tax compliance and fair competition.
Stablecoins could also raise the risk relating to financial stability and the monetary policy transmissions. Cœuré noted that big digital currencies like Libra could challenge the monetary sovereignty of countries if they would be used as a substitute for the country’s currency.
A working group has been set up by G7 finance ministers and central bank governors to address these concerns. The group is expected to present its finding in October.
Cœuré argued that even though existing regulations would already be able to address these concerns, some aspects of stablecoins may require some bespoke approaches. In the case of the EU, the European Commission would have to work together with member states, the ECB and relevant authorities to create new policies. So Cœuré is not expecting any final global policies about stablecoins any time soon.
“All things considered, Libra has undoubtedly been a wakeup call for central banks and policymaker,” Cœuré concluded.