Regulators will need to “step up” to contain any dangers emanating from digital currencies such as Facebook’s planned libra token, but shouldn’t attempt to crush the initiative, according to International Monetary Fund acting MD David Lipton.
“Risks include the potential emergence of new monopolies, with implications for how personal data is monetised; the impact on weaker currencies and the expansion of dollarisation; the opportunities for illicit activities; threats to financial stability; and the challenges of corporates issuing and thus earning large sums of money — previously the realm of central banks. So, regulators — and the IMF — will need to step up.”
He said a simple look at the risks means it “sounds as though it ought to be squelched”, but the development is more complicated.
“We look back at the the history of technology and innovation, and a conclusion is you never know at the beginning how valuable a technology will be,” he said at the French central bank’s Bretton Woods 75th Anniversary Conference in Paris on Tuesday. “It requires experimentation and adaptation over years and often decades.”
Lipton highlighted that privately backed stablecoins are revolutionising the digital payments system, speeding up payments and reducing their costs.
“These new instruments may do for payments what the Internet has done for information: make transactions secure, instantaneous and nearly free.”
G-7 agenda
The comments from Lipton — who is leading IMF in the interim while Christine Lagarde prepares to take over from Mario Draghi at the European Central Bank — coincide with scheduled testimony of Facebook top executive David Marcus on libra before US congressional committees this week. Digital currencies also are on the agenda of a meeting of Group of Seven finance ministers and central bank chiefs in Chantilly, near Paris, on Wednesday and Thursday.
French finance minister Bruno Le Maire, who was speaking at the same conference and is hosting the G-7 gathering, reiterated his opposition to Libra.
“We cannot let companies, which are serving private interests, gather all the attributes of sovereign states,” he said. “We must act.” — Reported by Zoe Schneeweiss and William Horobin, (c) 2019 Bloomberg LP