Stablecoin News for the week ending Wednesday 7th October.

We would not be talking CBDC’s without Libra.

Here is our pick of the 3 most important Stablecoin news stories during the week.

Lets face it! All this talk of CBDCs is defensive, in the sense that if there was no threat to Central Banks and the State’s monopoly on money, from the likes of Libra and Facebook, they would be moving even slower and paying even more lip service to actually doing something than they are now. 

This week the ECB came out and said it.  

“Our role is to secure trust in money,” President Christine Lagarde said as the ECB published a study into the benefits and drawbacks of a digital currency. “This means making sure the euro is fit for the digital age. We should be prepared to issue a digital euro, should the need arise.”

The consultation will start Oct. 12, and the experiment will be held in parallel. The ECB said it will decide toward mid-2021 whether to launch a digital euro project, which would start with an “investigation phase.”  A digital euro

All the talk is about protecting Sovereignty and the ECB’s central role in the Regulation, Distribution and manipulation (Monetary policy) of money, even going so far as to protect the term “Digital Euro”.  

Bloomberg confirmed that ECB lawyers at the German firm Bock Legal applied for the European Union Intellectual Property Office’s “digital euro” trademark on Sept. 22

European Central Bank Moves to Trademark ‘Digital Euro’

But for all the bluster once you read the report you can see that they are really at the beginning of an analysis process (rather than a building one) with many challenging decisions ahead such as protecting the current Banking system as well as individual rights to privacy.

ECB confident it can overcome challenges to create a digital euro

However, Geopolitical jostling accelerated by large-scale private stablecoin initiatives like libra, plus an added dose of COVID-19, means we are now facing a perfect storm for central bank digital currencies (CBDCs).

Such tectonic shifts are being acknowledged by big players like Deutsche Bank, the latest lender to issue a report on CBDCs and their looming impact.

The report, while quite conservative, recognizes the global financial system is in a state of exponential flux. For example, within only a decade of Bitcoin’s arrival, China has begun testing a CBDC in four major cities.

“The e-RMB and the Belt and Road Initiative would give China a chance to increase the importance of that currency overall,” Gerit Heinz, Deutsche Bank’s chief investment strategist, said in an interview with CoinDesk. “That could also imply some changes in the global reserve system.”

Challenging the marriage of convenience between the global financial system and the U.S. dollar may be the technology’s ultimate impact.

“CBDC has the potential to challenge the primacy of the U.S. dollar,” Heinz said.

It’s perhaps no surprise this potential decoupling is being driven hardest of all by China, the anchor of a region that holds half the world’s foreign exchange reserves, not to mention some of the niftiest digital payments infrastructure.

CBDCs Could Challenge US Dollar’s Dominance: Deutsche Bank

Meanwhile, while Central Banks “hurry up and wait”, in the Crypto world, stablecoins are going gangbusters with now 20b of value stored and the rate of growth increasing.

 

 

Total Stablecoin Supply Nearly Doubled in Q3, Adding Record $8B

So in summary, the Central Banks don’t cherish the idea of change but the twin forces of Libra and China with the accelerating effect of the pandemic almost certainly means that eventually they will be forced to.  In the meantime the current private sector alternatives to CBDC’s are growing and growing.

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Alan Scott is an expert in the FX market and has been working in the domain of stablecoins for many years.  

We have a self imposed constraint of 3 news stories per week because we serve busy senior Fintech leaders who just want succinct and important information.

For context on stablecoins please read this introductory interview with Alan “How stablecoins will change our world” and read articles tagged stablecoin in our archives. 

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