The chief economist of Dutch multinational banking and financial services giant ING says that Facebook’s plan to launch a digital currency has put pressure on central banks to launch their own.
In an article and video interview published on ING’s THINK portal on Sept. 27, Mark Cliffe said that there was “some urgency in the policy community” sparked by Facebook’s unveiling of the Libra stablecoin, which it plans to launch in 2020, pending regulatory clearance.
Cliffe proposed that central banks could, therefore, move towards launching their own digital currencies within the next two to three years.
Central bank digital currencies pave the way for negative interest rates
One major implication of such a move by central banks, Cliffe argued, would be the prospect of doing away with hard, physical currency such as coins and notes.
This, he claimed, would potentially allow central banks to move even further into negative territory with interest rates, thus opening up a whole range of new policy options.
He conceded that such a development would likely be controversial, considering clients’ anger at the prospect of negative rates and the resulting impact on their savings.
Even without a potential digital currency, European Central Bank president Mario Draghi had hinted at such a move earlier this year — a suggestion that was hotly challenged by ING CEO Ralph Hamers.
Cliffe, however, appeared sanguine about the potential both for central bank-issued digital currencies and adjustments to monetary policy, arguing that:
“This might open up a range of other options for central banks to help support economic activity in the next downturn.”
Libra and the currency stewards
As reported, the Cabinet of Germany and Germany’s central bank Deutsche Bundesbank are currently working together closely on issues related to central bank digital currencies (CBDCs).
In a major report released ahead of Facebook’s revelations, the Bank of International Settlements indicated this January that 70% of global central banks were engaged in CBDC work, but that only two had concrete plans at the time to proceed to issuance.
The People’s Bank of China may move to release its CBDC ahead of Facebook’s Libra, official sources have indicated, although uncertainty remains as to an eventual launch date.
Some have claimed that the announcement of Libra has, moreover, sparked debate among Chinese regulators and motivated the project’s designers to involve more non-governmental institutions in the currency’s development and issuance process.
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