According to Francois Villeroy de Galhau, the governor of France’s central bank, digital currencies should be controlled by central banks. He is opposed to the creation and issuance of digital currencies that are not issued by central banks.
The Utility of Digital Currencies
The central banker noted that digital currencies issued by central banks offered some real benefits to some nations around the world. According to a Reuters report, his statement in support of central bank digital currencies was not in reaction to the possible launch of Facebook Libra. He said it was in reaction to new technological developments and the real-world benefits that digital currencies could offer some central banks. Besides that, he said that the demand for digital currencies could grow over time, which would make it important for central banks to have an alternative to fulfill such a demand.
He gave the example of northern European nations, specifically the Netherlands and Sweden. According to him, the use of physical cash was already experiencing a major decline. As a result, the demand for a digital payment system was growing in that region. This led to central banks assessing whether they should issue digital currencies with a high level of quality and the security of a central bank. The governor confirmed that European nations were engaged in experiments with digital currencies. Besides that, he confirmed that the issue would be taken up by the Euro system Eurozone central banks.
Central Banks Working on Digital Currencies
Many central banks globally have begun working on a digital currency in response to the planned launch of Facebook Libra. These banks fear that if Facebook Libra launches in their local economies, it could make it harder for them to control their monetary policies. Several central banks globally are already working together to study the potential launch of digital currencies.
A recent report by the Bank of International Settlements found that about 80 percent of central banks were working on a digital currency. According to the report, 10 percent of the banks surveyed were close to launching a digital currency. The study found that the group that comprises about 10 percent of the central banks surveyed, had already launched pilot projects.
A good example of the launch of digital currencies is the joint project between Hong Kong and Thailand. The project will entail creating a wholesale digital currency to facilitate transactions between the two nations. Another nation that might soon launch a digital currency is Japan. Recently, politicians said there were ongoing discussions around the issue. They believe that this will help them keep up with China and the potential launch of the Facebook Libra digital currency.
Response from the Crypto Industry
The crypto industry is not supportive of central bank digital currencies. These digital currencies go against all the principles contained in the Bitcoin White Paper. It is not surprising then that a recent study revealed that such developments usually harm the price of crypto.
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