Talk of CBDCs and Facebook's Libra headlined this week's policy news, as international organizations weigh in on both.
Blockchain technology has attracted regulatory attention since its
inception. The security of the Bitcoin network despite the value of BTC
in play has consistently proved the resilience of blockchain technology
in maintaining records across a vast range of parties.
However,
many countries have determined that Bitcoin doesn’t behave as a currency
at all, or at least not a replacement for their own. The nations behind
the world’s most-used fiat currencies have in many cases pointed to
Bitcoin’s volatility as a critical flaw. They have decided that the rise
of stablecoins, especially over the past two years, poses a more clear
and present danger.
New stablecoins, pegged to fiat or gold or
baskets of currencies, can move value faster and more efficiently than
existing monetary systems. Facebook’s announcement of Libra last year
was a watershed moment. Monetary authorities quickly saw that Facebook’s
user base is far larger than the population of any country. Practically
overnight, Libra would conceivably be able to challenge every monterey
authority on earth.
Some central banks had already begun work on
their own digital currencies, but over the next year the U.S., EU,
China, Japan and Great Britain — which issue the five leading currencies
in the world — would all have active research into the subject of a
CBDC. But while governments are trying to keep up in the race to upgrade
their own currency, they remain suspicious of private entities like
Facebook challenging them. While this has been going on for some time,
the past week saw major flare-ups.
G7 and G20 will make Libra toe the line
The G20’s financial watchdog, the Financial Stability Board,
published new guidance warning governments as to the dangers that
global stablecoins pose to monetary sovereignty. The guidance comes on
the heels of a drafted G7 statement that promised to block stablecoins like Libra from launching until they address all regulatory concerns.
The
G7 and G20 both represent their respective number of countries,
including the largest economies in the world. That wealth ensures that
the countries involved have a stake in maintaining existing monetary
norms. However, everyone seems to recognize that money could be so much
better than it is right now.
As to concerns, the G20’s guidance
rattles off a number of the classics, including anti-money laundering
and terrorism financing. The overarching theme is that the key
advantages of crypto are also its greatest risks: Cryptocurrencies can
cross national boundaries far more freely than most money and reach way
more people than existing financial systems. But these announcements are
not aimed at crypto writ large. They put stablecoins in general and
Libra in particular right in the crosshairs of future action.
If
Facebook and the Libra Association want to continue — and they seem
determined to — they have a long road ahead. Moreover, it really looks
inconceivable that any Libra that boasts the global accessibility that
its initial whitepaper promised has any chance whatsoever at hitting the
market without being completely defanged. At least, that holds true in
the most developed economies of the world.
European Central Bank dodges commitment to a digital euro
The ECB, which issues the euro, has invited the public to comment on the development of a digital euro.
In
its announcement, the ECB made clear that it did not intend to replace
cash. It also drew a fairly clumsy distinction between any potential
digital euro and crypto assets. After pointing to crypto’s legendary
volatility as a difference, the announcement turned to stablecoins,
saying they they lacked the backing of a central bank. This is called
moving the goalpost.
While the invitation to consultation did not
many specific claims as to the mechanisms behind a digital euro, the ECB
is clearly doing its best to distance its project from stigma
associated with crypto. It is, therefore, revealing that the word
“blockchain” does not appear in the announcement. It’s obviously under
consideration, otherwise the bank would surely point to lack of a
blockchain as a real, substantive distinction between crypto and its
envisioned euro, but it’s also true that the word blockchain is still
subject to a lot of the same stigma and skepticism that drew the ECB to
draw distinctions with crypto in the first place.
Nonetheless, the
ECB’s breakdown of priorities for a digitized euro is clearly fixated
on deciding between privacy, speed, offline utility and security — the
classic tradeoffs of crypto.
...with Russia close behind
Not to be outdone, the Central Bank of Russia released a public consultation remarkably similar to the ECB’s, both in its concerns for a digital ruble and in avoiding mention of blockchain technology.
The
ruble is not the global currency that the euro is. That was the case
even before a collapse in value since 2014, as sanctions and slipping
oil prices took their toll on the Russian Federation’s engagement with
the global economy.
That said, Russia has been trying to increase
ruble usage among countries similarly isolated from the Western-led
global economy. It’s no surprise then that the Central Bank of Russia’s
announcement for the public consultation does not really dig into issues
of money laundering. Which, honestly, could prove good for the
prospective trade in a digital ruble.
Further reads
Attorneys for Baker Hostetler write on growing crypto precedent following the SEC’s courtroom victory over Kik.
Writing for Reuters, Francesco Canepa and Tom Wilson explain CBDCs as a tool to beat out crypto.
Coinbase publishes a new transparency report on its work with international governments and law enforcement over the first half of 2020.
source link : https://cointelegraph.com/news/law-decoded-the-rivalry-between-central-banks-and-global-stablecoins-oct-9-16
