22 Jan 2020 Pavel Petrov
Facebook’s Libra Suggests Central Banks To Form A Study Group
The central banks of Britain, the EU, Switzerland, Sweden, Canada, and Japan announced a cooperation for sharing know-how and use cases in the field of central bank-issued digital currencies.
The former Bank Of Japan (BOJ) Head of overseeing division, Hiromi Yamaoka, stated that such a decision clearly comes as a consequence of Facebook triggering central banks to enter a severe currency appeal competition.
“This decision is without a doubt with a different goal than sharing information. Central banks are trying to keep Libra’s progress under close surveillance. Furthermore, Libra’s costs per transaction are significantly less than the fees central banks have, so the banks need to step up their game and be more appealing to investors and customers,” Yamaoka said. The former BOJ head of the overseeing division is now a board member of Future Corp. During his time in the BOJ, Yamaoka monitored BOJ’s blockchain and digital currencies research.
Central banks worldwide are more and more interested in issuing their own digital currencies. For now, China seems to lead the pack, as the People’s Bank of China (PBoC) declared that their digital yuan would soon be ready for adoption. PBoC also received China’s President Xi Jinping’s “green light” for blockchain adoption. Meanwhile, Facebook’s Libra stablecoin project pushed central banks into researching their own alternatives for fast and cheap cross-border settlements.
Yamaoka confirmed that Bank of Japan and the European Central Bank did a joint research. However, there is still no plan for issuing a central bank digital currency (CBDC) in the near future for both Japan and the European Union. He also sees the new study group as a way for central banks to accelerate large-scale settlements for institutional clients. However, central bank small-scale solutions are most likely not going to work, as such a move could eliminate the competition in the private sector.
One of Yamaoka’s main concerns is that central banks could continue with the negative interest rates, as the streamlined settlement process could result in a more profound negative trend for end customers.
“Banks usually apply negative interest rates when they have sufficient funds. With the reduced transaction cost benefit of CBDCs, could lead to even further negative consequences.” Yamaoka explained.
According to Yamaoka, the primary goal for central banks is to make their currencies more attractive both to investors and customers. Furthermore, the convenience of using CBDCs as a medium for fast and secure settlement could diversify the process.
“Look at the Federal Reserve of the United States – they issue the world’s most utilized currency. Therefore, they don’t plan to migrate to CBDCs in the near future. There has to be a reason for that, and that is the popularity of the U.S. Dollar. Monetary policies are as effective as the popularity of the currency”, Yamaoka concluded.Bitcoin Cryptocurrency Regulations Cryptocurrency Crypto Market Japan crypto European Commission china cryptocurrencies bank sweden crypto news daily switzerland Europe Banks UK Finance Facebook