ECB’s policymaker encourages EU banks to fight Libra with a cheaper payment solution

Written by: Ali Raza
March 11, 2020
  • European Central Bank's policymaker, Jens Weidmann, recently spoke about Facebook's Libra and how the central banks should respond to it.
  • While banks around the world have started developing their own CBDCs after Libra was announced, Weidmann believes that this is not the answer.
  • He believes that CBDCs should be carefully studied, that blockchain is not superior to technologies used right now, and that these technologies need to be improved, not replaced.

According to Jens Weidmann, who acts as the policymaker for the European Central Bank (ECB), as well as the President of Germany’s central bank — European banks should be careful with their response to Libra. He does not believe that the creation of a counter-solution, such as digital euro, is the right way to go about it.

Instead, Weidmann thinks that European banks should create a faster, cheaper solution in order to keep their customers and counter the benefits that Facebook’s Libra might offer.

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In his interview with German newspaper Handelsblatt, Weidmann stated that he does not think that the state should be always called right away. Instead, companies should be the ones to develop an offer that would satisfy customers’ requests. What this means is that he believes that banks should first try to improve existing technologies, and define and understand CBDCs, their pros, and their cons.

It is still too early for CBDCs

Weidmann thinks that it is still too early for CBDCs. On the other hand, Christine Lagarde, the President of ECB, believes that central banks should get ‘ahead of the curve,’ when it comes to stablecoins. Lagarde announced that ECB already has plans to create a cryptocurrency task force that should be formed by mid-2020.

Meanwhile, several countries around the world are preparing to launch their own, national cryptos, including China and Sweden. Weidmann still believes that this is not the way to go, and he stated that China might be faster, but its political system is entirely different.

As for Germany’s central bank, it has also been conducting experiments with cryptocurrency, despite Weidmann’s stance. When asked about it during the interview, he mentioned that the experiments were about payment transactions between commercial banks and the central bank. However, he seems to believe that blockchain is no more efficient than central processing that is already in place.

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