Representatives from Libra, Facebook’s proposed cryptocurrency and blockchain, and investment bank JP Morgan met officials from the Bank of International Settlements (BIS) in Switzerland today to discuss policy and regulatory issues relating to stablecoins.
The meeting was part of an effort by the bank to understand stablecoins, cryptocurrencies whose price is pegged to that of fiat currencies or basket of goods. Numbers for such coins have proliferated in recent times, mainly because stablecoins are expected to fulfill Bitcoin’s original promise of becoming a medium for daily transactions and businesses. JP Morgan plans to use stablecoins to streamline cross-border bank transfers, issue debt, and use the coin in its treasury services business.
Facebook revealed details about Libra, a coin it plans to release by the end of next year, last June. Libra, which is backed by five fiat currencies, is aimed at providing services to the world’s unbanked population.
But global regulators have been less than impressed with Facebook’s idea. They have expressed concerns over the policy and privacy implications of a cryptocurrency that harnesses the social media behemoth’s network. The EU has been strident in its criticism of the Libra initiative. French finance minister Bruno Le Maire was among the first senior government officials to criticize Libra.
Agustín Carstens, General Manager of the BIS, stated that it was important for regulators to coordinate and come to a common understanding about Facebook’s coin. His colleague, Benoit Cœuré, chair of the Committee on Payments and Markets Infrastructure, said the “untested” nature of stablecoins gave rise to serious risks in the realm of public policy priorities. “The bar for regulatory approval will be high,” he stated.
Libra Chief Marcus Says Coin Will Not Threaten Monetary Sovereignty
Meanwhile, Libra chief David Marcus put out a series of tweets this morning to reassure regulators around the world that the cryptocurrency was not a threat to their currencies.
Policy makers have pointed out that Libra’s popularity could create a parallel economy, especially in countries with weak currencies. Marcus’ tweets, however, did not touch on those concerns.
In the tweets, he emphasized the fact that Libra will not create money. Instead it will be backed by strong currencies and will have “strong regulatory oversight” to prevent deviations in its price.
Last week, the social network divulged the constitution of its basket of currencies. The US dollar will be roughly half of its overall reserves and the rest will be divided amongst the Singapore Dollar, Japanese Yen, Great Britain’s Pound, and the Euro.