Facebook’s proposed cryptocurrency and blockchain Libra may have raised regulatory hackles, resulting in an exodus of partners, but the very idea of a mass-enabled cryptocurrency has galvanized central banks into action, according to Stefan Ingves, governor of Sweden’s central bank Riksbank.
During an appearance on CNBC, he said that Facebook’s Libra has been an “incredibly important catalytic event” in the development of money. “…When Libra showed up out of the blue…that forced us to think hard about what we do.”
Ingves framed Facebook’s proposed cryptocurrency and blockchain as a change from the paper-based paradigm in the issuance of money and associated products since the 1800s. “In this day and age we have to twist things in our heads and do things based on the assumption that nothing is on paper, and then when we talk about money, everything is going to be digital in one form or the other,” he said.
Ingves added that his country’s central bank would be “out of business” if they started issuing 20-kilo copper coins similar to the way they did in 1668. “Part of my job is to produce a good/service called the Swedish krona which is convenient to use for Swedish citizens, and if I’m good at that in a technical sense then I don’t have a problem,” he said.
The Swedish central bank is the world’s oldest and has been investigating the issuance of a digital currency, similar to its paper Krona, since 2017. According to some estimates, Sweden could go cashless in less than four years, primarily due to declining usage of paper-based currency. The central bank is slated to pilot an e-krona test before the end of this year, according to reports.
Ingves’ comments came a day after Bookings Holdings, owner of a slew of online travel sites, became the latest Libra partner to withdraw from its governing association. The project has now lost a quarter of its original partners and is under attack from several governments around the world. In a bid to defuse rising regulatory tension about the project, Facebook CEO Mark Zuckerberg is scheduled to testify before the U.S. Congress next week to answer questions from representatives.
Alarm about Libra has mostly centered on the fact that it will be private money issued by a company which has a reputation for playing fast and loose with existing rules and privacy. In that respect, concerns about money in the digital age remain identical to those from the earlier one. “But the old issues—private sector money or public sector money—they are basically identical, and if history gives us any guidance at all then almost all private sector initiatives have collapsed sooner or later,” said Ingves.