When Facebook and a swath of partners — a list that at the time included PayPal, Visa, Mastercard, and Vodafone — unveiled the Libra cryptocurrency project in June of 2019, the world was shocked; one of the world’s most powerful companies, coupled with some of the most prominent fintech firms, venture capitalists, and technology upstarts, joined hands in hopes of creating a new financial system for the underbanked and unbanked.
Simply, central banks and the world’s governments weren’t expecting a project of such a scale. So quickly, they sprung into action, seemingly in an attempt to research a system that could pose a threat to the hegemony of traditional systems.
As a former Bank of Japan executive said in a recent interview, the launch of Libra pushed major central banks to study the potential for their own digital currencies.
Although Libra has already been strongly hampered — with the Association, a group independent of Facebook, effectively running the project losing some of its headline partners in PayPal and Visa and Vodafone most recently — the pushback against the project has continued.
French Central Banker Bashes Libra
In a comment issued Saturday, Bank of France Governor Francois Villeroy de Galhau said that “currency cannot be private, money is a public good of sovereignty,” seemingly throwing cold water on Libra’s intent to launch a cryptocurrency, a new global form of money, backed by a reserve made up of an aggregate of leading fiat money.
This is a similar comment to that made by German Finance Minister Olaf Scholz in September of last year, who then made it clear that “We cannot accept a parallel currency,” adding that “stablecoins [should not] become an alternative to official currencies.”
Even if Libra manages to launch, analysts are skeptical that it will garner adoption or pose a threat to fiat currencies.
IMF chief economist Gita Gopinath wrote in an op-ed published to the Financial Times earlier this month that while digital asset projects as “intriguing,” they are unlikely to make any move on the fiat system in the near term.
She specifically looked to the U.S. dollar’s role in effectively running the world’s economy, effectively stating that if the American currency lost monetary hegemony, the world would cease to function:
“The dollar holds strongly reinforcing roles in trade invoicing — it accounts for five times the US share of world trade — and global banking. These have created large network effects: the more people use the dollar, the more useful it becomes to everyone else.”
Crypto An Unstoppable Force?
Although there is skepticism around private cryptocurrencies and decentralized cryptocurrencies, some say that it is only a matter of time before digital assets take over the world.
Per previous reports from Blockonomi, Deutsche Bank, the 17th-largest bank by assets in the world, gave a strong nod to the cryptocurrency market in its “Imagine 2030” report, written as a way to illustrate the institution’s thoughts on the future of society.
Strategist Jim Reid said that the “current fiat system” is “fragile” and could thus “unravel in the 2020s.” Reid claimed that if this takes place, there will be a “backlash against fiat money and demand for alternative currencies, such as gold or crypto could soar.”
The Deutsche Bank analyst specifically looked to the high levels inflations of the dollar in the 1970s, which led to a surge in the prices of gold.
This came after U.S. Congressman Patrick McHenry said in a congressional testimony that “The world that Satoshi Nakamoto, author of the Bitcoin whitepaper envisioned, and others are building, is an unstoppable force.”
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