I was recently invited to participate in a virtual roundtable for the ANON Summit 2020, discussing CBDC, Libra and China with other panelists. Let me summarise my initial and own observations:
It is very hard – even for experts – to distinguish between Libra, by definition a stablecoin, and Central Banking Digital Currencies. The Bank of International Settlement calls them “central bank cryptocurrencies“ (CBCC), which I prefer because it contains the conflicting terms “central“ and “crypto“. In simple words: a stabecoin is pegged to a fiat currency (or any other reserve) to take out the volatility, while CBDCs are digital versions of fiat currencies. I think the confusion arises, because private FMIs are creating the landscape for fin-tech innovation.
All my co-panelists agreed that CBDCs have a long road ahead. Five to seven years at least, maybe two years for countries like China.
I missed one central discussion point though: CBDCs should be a framework, drafted by a central government institution, to define the privacy and identify aspects of a digital fiat currency. This would impact AML and KYC. I was surprised how positive Libra is seen in this context, when almost only private companies like Coinbase, Facebook, Shopify, Uber, and others would control this stablecoin.
Aside from the discussion, it is fascinating how fluid the topic of stablecoins is right now. We therefore plan more Blockchain-related posts in English language.
New cryptocurrencies are emerging almost daily, and many interested parties are wondering whether central banks should issue their own versions. But what might central bank cryptocurrencies (CBCCs) look like and would they be useful? This feature provides a taxonomy of money that identifies two types of CBCC - retail and wholesale - and differentiates them from other forms of central bank money such as cash and reserves. It discusses the different characteristics of CBCCs and compares them with existing payment options.