ECB urges banks to come up with cheaper alternative to stablecoin Libra

Facebook’s stablecoin Libra continues to give nightmares to government officials and banks across the world as a policymaker from the European Central Bank (ECB) and President of the German central bank, Jens Weidmann, urges European banks to bring about cheaper, faster and more secure alternative to Libra, reports a German news outlet on 2nd January 2020.

No doubt, Libra is one of the most anticipated projects of 2020; however, the Zuckerberg-led initiative has so far struggled to keep regulators satisfied and supporting partners on board. Ever since its launch, Libra has managed to strike all the wrong chords and offered a reality check to central banks across the globe. Thus, in an attempt to retain financial control, banks are coming up with state-backed digital currencies as an alternative to this private stablecoin.

Only CBDC cannot counter stablecoin Libra, ECB official

However, according to Weidmann, this is not enough. We need to counter the groundbreaking concept behind stablecoin Libra with a much efficient, secure and affordable payment platform, he says. 

I don’t expect the state to come up with a solution right away, but in a consumer-centric economy, banks need to be the first ones to meet consumer demands, Weidmann explains.

On questioned whether or not he thinks central bank digital currency (CBDC) is the answer to Libra, he is quick to respond that it is too early to confirm that call. Weidmann believes that in order to take that decision, banks need to carefully weigh up the pros and cons, determine the risks associated with it and evaluate whether they can be controlled. Only then can a CBDC be put into force, he confirmed.

We need Libra-like system for a free society, ECB official

Regarding countries like China and Sweden making headway in developing their own digital currencies, Weidmann said that those countries have a different kind of administration altogether. If we impose such wealth of power on our economies, people will not like it. Thus, we need to develop something that’s efficient in a liberal society such as Europe, says Weidmann.

As far as German Central Bank taking the lead in experimenting with its own digital currency, Weidmann affirms that it is only limited to payment facilitation between central and mainstream banks. The central bank is working on supplementing its core account-based solution using blockchain; however, it hasn’t achieved a breakthrough yet, Weidmann claims.

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