Blockchain technology has captured the attention of regulatory bodies since its inception. The security of the Bitcoin network despite the value of BTC at stake has consistently demonstrated the resilience of Blockchain technology in record keeping across a large number of parties.
However, many countries have determined that Bitcoin does not behave like a currency at all, or at least not a substitute for their own. The nations behind the most widely used fiat currencies around the world point to Bitcoin’s volatility as a critical failure in many cases. They have decided that the rise of stablecoins, especially in the last two years, poses a clearer and more present danger.
New stablecoins, pegged to fiat money, gold or baskets of currencies, can move value faster and more efficiently than the monetary systems that exist today. Libra’s Facebook announcement last year was a watershed moment. The monetary authorities quickly saw that Facebook’s user base is much larger than the population of any country. Virtually overnight, Libra would be able to challenge every monetary authority in the world.
Some central banks had already started working on their own digital currencies, but the following year the United States, the European Union, China, Japan and Great Britain, which issue the five main currencies of the world, would initiate an active investigation on the subject of a CBDC. But while governments try to stay in the race to improve their own currency, they remain suspicious of private entities like Facebook challenging them. While this has been going on for some time, last week we saw some outbursts.
The G7 and G20 will make Libra tread the line
The G20’s financial watchdog, the Financial Stability Board, released new guidance warning governments about the dangers global stablecoins pose to monetary sovereignty. The guidance came on the heels of the draft of a G7 statement that promised to prevent the launch of stablecoin like the Pound until all regulatory concerns are addressed.
Both the G7 and the G20 represent their respective number of countries, including the world‘s largest economies. That wealth ensures that the countries involved have an interest in maintaining existing monetary rules. Yet everyone seems to recognize that money could be much better than it is today.
As for concerns, the G20 guide refers to several classics, such as the fight against money laundering and the financing of terrorism. The general theme is that the main advantages of cryptocurrencies are also their greatest risks: cryptocurrencies can cross national borders with much more freedom than most money and reach far more people than existing financial systems. But these ads are not targeting cryptocurrency as such. They put stablecoins in general and Libra in particular in the crosshairs for future action.
If Facebook and the Libra Association want to move on, and seem determined to do so, they have a long way to go. Further, It seems truly inconceivable that any Libra that boasts of the global accessibility promised in their initial white paper would have any chance of getting to market without having their fangs removed entirely. At least that’s true in the world‘s most developed economies.
The European Central Bank evades its commitment to a digital euro
The European Central Bank (ECB), which issues the euro, invited the public to comment on the development of a digital euro.
In your ad, the ECB made it clear that it had no intention of replacing cash. He also drew a very bland distinction between any potential digital euro and crypto assets. After pointing out the legendary volatility of crypto as a difference, the announcement targeted stablecoins, saying they lacked the backing of a central bank. This is called moving the goal posts.
While the consultation invitation did not make many specific claims about the mechanisms behind a digital euro, the ECB is clearly doing everything it can to distance its project from the stigma associated with cryptocurrencies. It is therefore revealing that the word “blockchain” does not appear in the advertisement. It’s obviously under consideration, otherwise the bank would surely point to the lack of a blockchain as a real and substantive distinction between cryptocurrencies and their intended euro, But it is also true that the word “blockchain” is still subject to much of the same stigma and skepticism that led the ECB to make distinctions with cryptocurrencies in the first place.
However, the breakdown of the ECB’s priorities for a digital euro is clearly set on deciding between privacy, speed, offline usability and security, which cryptocurrencies offer.
… with Russia very close
To not be outdone The Central Bank of Russia launched a public consultation remarkably similar to that of the ECB, both in its concerns for a digital ruble and in avoiding mention of Blockchain technology.
The ruble is not the global currency that is the euro. That was the case even before its value plummeted from 2014, when sanctions and falling oil prices took their toll on the Russian Federation’s participation in the world economy.
Having said that, Russia has been trying to increase ruble use among countries similarly isolated from the Western-led global economy. Not surprisingly, the Russian Central Bank’s announcement for public consultation does not delve into money laundering issues. Which honestly could be good for future trading with a digital ruble.
The attorneys at Baker Hostetler write about the growing precedent of cryptocurrencies following the SEC’s victory over Kik.
Writing for Reuters, Francesco Canepa and Tom Wilson explain CBDC as a tool to beat cryptocurrencies.
Coinbase publishes new transparency report on its collaboration with international governments and law enforcement agencies during the first half of 2020.
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