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Facebook's Libra can coexist with central banks' digital currencies, says its co-creator
THERE is still a future for Facebook’s embattled digital currency Libra, even if central banks around the world decide to create their own digital currencies, said Christian Catalini, co-creator of Libra and head economist of Calibra, a digital currency wallet that is a subsidiary of Facebook.
“From the start, it was clear to us that eventually central banks will be issuing some flavours of central bank digital currency, and we wanted the system to be future-proofed for that,” he told a packed audience at the Singapore FinTech Festival and Singapore Week of Innovation and TeCHnology (SFF x SWITCH) panel discussion on Tuesday.
Libra would have built on those central bank digital currencies (CBDCs), he added. But the challenge was that there was hardly any precedent to ride on.
Libra was a particularly hot topic during the 45-minute long discussion, given that it has faced intense scrutiny and backlash from the get-go. It is known as a “stablecoin”, or cryptocurrencies that are pegged to a basket of fiat currencies, securities or commodities, so as to reduce the price volatility. Almost a quarter of the grouping originally backing the Libra project has departed, including payments firms Visa and Mastercard.
Mr Catalini briefly attempted to address a key concern of central bankers that stablecoins will interfere with monetary policy and financial stability.
“The Libra reserve, and all the thinking that went into ensuring that actually Libra is based on assets that are managed, controlled and generated by central banks, is very much a complement to monetary policy,” he said, but did not elaborate on how.
Even if CBDCs do come into the picture, it would help to streamline the operations of Libra, which was meant to be a payment network, he said.
It “wouldn’t make sense” to abandon Libra in that scenario as it will be even more effective, allowing greater focus on enabling cheap and fast payments on top of the central bank issued assets, added Mr Catalini.
Mr Catalini was speaking on a panel together with Serey Chea, assistant governor and director general of central banking, National Bank of Cambodia; Mu Changchun, director-general, Institute of Digital Currency, People’s Bank of China; and Umar Farooq, head of digital treasury services and head of blockchain CIB, JPMorgan Chase & Co.
JPMorgan’s Mr Farooq said that, on the contrary, he would be tempted to kill the JPMorgan coin, if the US Fed comes up with its own digital currency. That being said, he added the caveat that it has to be “well designed”, otherwise it could result in the current commercial banking system that runs the world to be at risk.
In February, JPMorgan was the first US bank to create a digital coin based on blockchain technology to enable the instantaneous transfer of payments between institutional clients. A JPM coin has a value equivalent to one US dollar.
For all our coverage on this year’s Singapore FinTech Festival x Singapore Week of Innovation and TeCHnology (SWITCH), go to bt.sg/sffxswitch2019