The first cryptocurrency transaction in history was feted in just two words: “Running Bitcoin”, which came in the form of a tweet on January 11, 2009 by Hal Finney, a US software developer. Some 10 years and over 1600 initial coin offerings later, the world of crypto-, virtual and other digital currencies looks to have provoked an active response from financial sector leaders. However, this was sparked not by an entity with an established cryptocurrency profile, but by social media giant Facebook. In June 2019 the company introduced its digital currency Libra. Initially set to launch the following year, Facebook announced in March 2020 that it was considering a redesign of the Libra network. International media reported that, following widespread opposition to the project, Libra may be recast as a digital payment system accepting existing currencies, which would be able to support the Libra token at a later date.
Central banks and global institutions spent the previous decade quietly watching the development of alternative currencies, but are now taking action after Facebook’s announcement. They have made it clear that they perceive digital currencies as a threat to economic stability, and argue that having a leading technology company participate in the financial services landscape exacerbates that risk. According to Jerome Powell, chairman of the US Federal Reserve, Facebook’s size and global reach would make Libra an instant and systemic risk.
Growing Momentum
In January 2019 the Bank of International Settlements (BIS), a Switzerland-based organisation of central banks, stated that most central banks were “not seeing the value’’ in creating their own digital currencies. However, two weeks after the Libra announcement, Agustín Carstens, general manager of the BIS, announced that multiple central banks were working on issuing their own digital currencies, and that the BIS is offering technical advice on the process of doing so.
According to a BIS survey published in 2019, more than two-thirds of the 63 banks surveyed were considering creating central bank digital currencies (CBDCs). While most of the banks have not explicitly stated that the goal of their offering is to crowd out Libra, the European Central Bank has more directly said it plans to establish its own digital currency in response to the Libra proposal.
Read the full Global Perspective in The Report: Morocco 2020
