Facebook’s Libra Could Fix Banking Issues Like Access And Cross Boarder Payments: ECB Executive
In a speech on the hearing of the topic, “Digital currencies, focusing on Libra“, in the German Parliament, Mr. Benoît Cœuré, Chair of the CPMI and Member of the Executive Board of the ECB, stated two major issues facing the global payment systems – access to digital payment systems and the cross-boarder retail payments system.
A Broken Global Payment System
According to a World Bank report in 2018, close to a third of the adult population remains unbanked with no access to basic services. Consequentially, these people are locked out from global payment systems despite 1.1 billion people (64% of the unbanked population) owning a mobile phone and 25% of the population having access to the internet.
Cross border payment systems are also a huge hindrance to having a global payment system according to the speech. The slow and expensive nature of traditional remittance systems has made it difficult to onboard new customers requiring cross-boarder payments. Cœuré further explained,
“Yet [traditional cross border payments] are generally slower, more expensive and more opaque than domestic payments (CPMI, 2018). Sadly, the cost of cross-border remittances imposes the greatest burden on those who are least able to bear it.”
A future with Libra Solution
According to Mr. Cœuré, both of the problems mentioned above are solvable by the adoption of Libra stable coin. However, the widespread adoption of Libra still faces a few regulatory challenges to stop the stable coin from illicit and illegal use across borders. Cœuré said,
“Of particular concern are the risks related to anti-money laundering and countering the financing of terrorism, as well as consumer and data protection, cyber resilience, fair competition and tax compliance.”
Central Banks on Libra
Given the benefits and challenges Libra brings to financial payment systems, Cœuré, believes the stable coin has been “a wakeup call for central banks and policymakers.” The rapid developmental progress and technological speed in creating stable coins will definitely shift consumer preferences towards digital assets. He further said,
“The demand for fast, reliable and cheap cross-border payments is bound to grow further in coming years. Policymakers and central banks should respond to these challenges.”
The Financial Stability Board, a group mandated by the G7 finance ministers and central bank governors, are looking into the challenges presented by the adoption of stable coins. The committee will give its recommendations to the G7 ministers who will then present policy recommendations during the IMF-World Bank Annual Meetings next month in a bid to guide regulations to be set on these assets.