I think it is quite likely that some of the central banks will issue digital currencies,” said Sir Howard Davies, the chair of NatWest Group
Facebook’s plans to launch a new digital currency have “frightened” central banks around the world into seriously exploring whether they ought to launch their own versions, according to the Bank of England’s former deputy governor Sir Howard Davies.
The social media giant has been working on its own digital currency since 2019 and could now launch as early as January 2021.
Whereas digital payment tokens such as Bitcoin and Ethereum have been popular with some speculators this year, they have not taken on the normal functions of money because of their extreme price volatility.
But analysts think that Facebook’s Libra – which would be a “stablecoin”, meaning backed by a conventional currency such as the dollar – could be a very different proposition, especially if it adopted by a considerable chunk of the social media company’s 2.7 billion active users around the world.
The initial formulation really put the frighteners on the central banks because they could see suddenly that if they did get this going and it [could] monopolise international transfers…because it was going to be backed by assets, it wasn’t going to be volatile like a Bitcoin.”
In 2019 the Bank of England’s Financial Policy Committee, which is charged with scanning the horizon for potential threats to financial stability, said Libra was potentially a “systemically important payment system”.
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But it is a real thing! Well as real as things get in cryptoland anyway. It is in fact a kind of “stablecoin”, except that rather than being pegged a fiat currency such as the dollar, like most stablecoins, this one is pegged to . . . bitcoin! A string of 1s and 0s representing another string of 1s and 0s. And why would you want to use a stablecoin pegged to bitcoin rather than bitcoin itself? Well Wrapped Bitcoin is what’s called an “ERC-20 token”, meaning it runs on the Ethereum blockchain, and apparently its appeal is that it allows users “to participate in decentralised finance (“DeFi”) apps that are popular on Ethereum”.