Facebook’s upcoming digital asset called Libra might pose a threat to the future of money, ECB board member Fabio Panetta said at a Bundesbank-convened future of payments conference.
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According to Panetta, the impending revolution in payments requires watchdogs "to stand ready to reinvent sovereign money."
"Stablecoin users are likely to bear higher credit, market and liquidity risks, and the stablecoins themselves are vulnerable to runs, with potentially systemic implications," Panetta added.
Panetta believes the danger could be mitigated if the stablecoin issuers put their reserves in the form of risk-free deposits at central banks.
"This would not be acceptable, however, as it would be tantamount to outsourcing the provision of central bank money," Panetta added.
Meanwhile, the ECB and the national central banks have already initiated preliminary experimentation through four work streams. In the first place, the financial regulator will test the compatibility between a digital euro and existing central bank settlement services (such as TIPS), Panetta emphasizes. After that, the ECB will explore the interconnection between decentralized technologies and centralized systems.
Once the interconnection is explored thoroughly, the European watchdog will investigate the use of payment-dedicated blockchains with electronic identity and will assess the functionalities of hardware devices that could enable offline transactions, guaranteeing privacy.
Panetta thinks traditional money should modify under circumstances in the form of cash, and, potentially, in the digital space.
As iHodl earlier reported, Facebook's digital currency will reportedly be rolled out in January 2021. The exact launch date depends on when Facebook receives approval from the Swiss Financial Market Supervisory Authority.
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