ECB Official Calls on Banks to Take on Facebook’s Libra

An official with the European Central Bank (ECB) would like to see banks develop a cheaper and faster payment solution in anticipation of Facebook’s planned digital currency Libra.

Last year Facebook announced its plans for Libra, a blockchain-backed cryptocurrency designed to give people around the world that don’t have access to a bank account access to digital payments at low or no cost. The stablecoin will be backed by real-world currency like bank deposits and short-term securities.

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While the social media giant’s CEO Mark Zuckerberg told Congress in October that Libra could fill a global payments void, regulators and lawmakers around the world are opposed to the plan, expressing concern over the risk of Libra destabilizing the global economy, as well as fears that the crypto could be used for criminal activity. In fact, France and Germany have said they would block the use of Libra if it was ever launched.

In response to Facebook’s plan, ECB President Christine Lagarde called on the central bank to get "ahead of the curve" on stablecoins. In addition, China and Sweden also have plans to release their own national digital currencies.

But Jens Weidmann, president of Germany’s central bank and a policymaker with the ECB, isn’t on board with developing a digital euro right now. Instead, he would rather see banks come up with a way to make payments more affordable for the masses.

“I don't believe in always calling for the state right away” to come up with solutions, he told German newspaper Handelsblatt. “In a market economy, it is first up to companies to develop a corresponding offer for customer requests.”

And while Germany’s central bank is currently experimenting with a digital currency, Weidmann countered that the effort is focused on payment transactions between the central bank and commercial banks. He added that the central bank is also testing blockchain technology to supplement its main account-based solution, but that it has so far not seen better results.

“In our special context with a few business partners we know, blockchain is initially no more efficient than central processing,” he said.