Facebook’s Libra project has garnered the attention of the whole. Everyone from regulators, to the blockchain community, to the bankers of the world wants to see what’s next from Libra.
Libra Carries On
Libra, for its part, has quietly answered the indictments of politicians, and happily built its platform in the background.
The prospect of Libra encouraged at least one central bank to consider digital currency. According to former Japanese central banker Hiromi Yamaoka, central banks are willing to consider digital currencies for a number of reasons.
In one respect, it can keep Facebook and its Libra platform “in check.” In another, Libra and other cryptocurrency movements have given banks reason enough to modernize their operations, and hope to compete with the coming innovations.
The latest decision is not just about sharing information. It’s also an effort to keep something like Libra in check […] Major central banks need to appeal that they, too, are making efforts to make settlement more efficient with better use of digital technology. […] In the world of central bankers, the idea of using CBDCs to enhance the effect of monetary policy seems to have subsided somewhat. There are increasing doubts about the effect of negative interest rates as a policy tool. If so, do you want to issue CBDCs for the sake of deploying a policy with questionable effects?
The Rise of CBDCs
Other central banks, including China, are working hard on issuing a new digitized version of their fiat currency. The dream of these Asian banks, and others, is to compete with cryptocurrency on the grounds of convenience and, of course, liquidity.
One thing that cryptocurrency can’t fight fiat on right now is the ability to use it. While you can cash out cryptocurrency pretty easily these days, it’s still relatively difficult to use it anywhere.
This is the exact opposite with fiat cash, which you can use everywhere.
Banks are taking this, and other factors, into account, as they build their new applications and infrastructures for the purpose of competing with cryptocurrency, including Libra.
The question, at this point, is how many countries will eventually have digital currencies. Will the United States be among them, or last to adopt? Questions like these are important when considering what to bet on, moving forward.
While there have been a bunch of stablecoins launched, it’s hard to see them competing very successfully against a native bank-issued token. This token would essentially be the thing that stablecoins try to represent. It would be living on exchanges and, presumably, eventually, a blockchain, and so it would be vastly superior to any stablecoin issued right now.
But the United States, after all, is not among the first countries considering a digital currency.
Banks that do want to compete with Libra and other stablecoins will probably launch their first central bank-issued digital currencies in a matter of years.