On Thursday Jens Weidmann, a high-ranking official at the European Central Bank said that stablecoins should not alarm anyone in the financial world. However, he emphasized the need for heightened awareness amongst users of stablecoins. Weidmann said that anyone planning to use stablecoins should ensure that all questions regarding their preferred stablecoin had been cleared up.
While Weidmann is enthusiastic about stablecoins, particularly the Facebook Libra project, his counterparts in the G7 grouping do not appear to share his sentiments. In fact, the G7 finance ministers recently warned that stablecoins like Libra were a major threat to the global financial system. According to them, this threat could only be mitigated via strict regulation. France’s Minister of Finance said that it was unacceptable for private entities to issue currencies. The main reason for this, in his opinion, was that these companies were not democratically controlled.
At the same meeting, Weidmann, who is also president of Deutsche Bundesbank, is supposed to have warned against suppressing “innovative financial concepts” like Libra without knowing full details. “If they deliver what they promise, they can be attractive to consumers,” he said.
Weidmann’s comments are significant as they come after David Marcus, head of Facebook’s Libra, provided testimony to US lawmakers regarding the project. His remarks are also important in the context of comments made about the project by another central banker, US Federal Reserve Chair Jerome Powell. In his testimony before a Congressional Committee, Powell said that Facebook Libra, a stablecoin, presented serious concerns regarding money laundering and consumer protection. He also suggested that the Facebook Libra project was a threat to the existing global monetary system. Weidmann’s sentiments appear to be in line with those of Burkhard Balz, who is also an official at the Bundesbank. Mr. Balz has previously stated that crypto was not a threat to the stability of the existing financial system.