Libra 2.0 could end up being one of the biggest threats to central bank cryptocurrency expectations (CBDC).
Central bank cryptocurrencies are accelerating their development and are getting closer to their launch. China has reached the final stage and many other countries are following the same path. O Official Monetary and Financial Institutions Forum (OMFIF), launched the Digital Monetary Institute, a forum to deepen knowledge about central bank cryptocurrencies (CBDC).
Philip Middleton, president of the Digital Monetary Institute, in a podcast, explained the various events that led to the creation of CBDCs, the implications of digital fiat currency once introduced and much more. Commenting on the various external factors that drove the creation of a CBDC, Middleton stated:
“Two major external events – one was the announcement of the potential launch of Libra. A stablecoin launched by a major global technology company posed a direct threat to central banks and financial stability. The second factor is COVID-19. ”
In this context, the Bank of England was one of the first organizations to initiate a global discussion on the prospects for the introduction of a CBDC and the bank has released several discussion documents to date, exploring the uses of a CBDC. However, the point here is that central bank presidents are unlikely to find answers on their own, without the help of the private sector. Both entities will have to find a middle ground and find a way to work together. In response to this, Middleton stated:
“I hope that many countries will experience the type of system by which the central bank provides this currency, but private sanctity provides the means of delivery and, in fact, private sector operators are also encouraged to operate.”
The point to be highlighted here is that, although the CBDC project ends up being a partnership between the government and a private entity, all final decisions will be made by central banks and the private entity will have no voice. So the question arises: ‘What is this partnership for?’, ‘Why would people want to go back to the same old centralization, when decentralized currencies are available?’. In addition, with the entry of Facebook’s Libra 2.0, with the support of 75 leading technology companies, it will be a significant competitor to the CBDC projects of many central banks.