With aspirations to make projects like Facebook’s Libra redundant, euro zone central banks and governments are at work on a plan to roll out a public cryptocurrency. The bloc is also going after a stricter approach from a regulatory perspective in the event that Libra should ask for authorizations to operate on the continent, Reuters reported.
Work on the European Central Bank (ECB) project began prior to Libra’s rollout and could last months or years. The project has faced some bank opposition, and the technical feasibility is not yet known.
ECB board member Benoit Coeure said per reports that Libra was “a wake-up call.” He added that “we also need to step up our thinking on a central bank digital currency.”
The project could enable consumers to tap into electronic cash that would be deposited directly at the ECB without the need for financial intermediaries, clearing counterparties or bank accounts. Those players – which are now necessary to process digital payments – may not be needed any longer if the ECB assumes those functions. It was also noted that Libra’s plan would not have financial intermediaries.
At the same time, authorities in the European Union are reportedly sending a message to Facebook that Libra isn’t welcomed in the continent. Coeure said, per the report, “certainly the bar set for regulatory approval will be very high.”
In separate news, the ECB is being advised by Board Member Yves Mersch that Facebook’s Libra could impact its ability to make monetary policy. “Depending on Libra’s level of acceptance and on the referencing of the euro in its reserve basket, it could reduce the ECB’s control over the euro, impair the monetary policy transmission mechanism by affecting the liquidity position of euro area banks, and undermine the single currency’s international role,” Mersch said, per reports.