VoxEu, policy news, and analytics portal of the Centre for Economic Policy Research (CEPR) made an in-depth analysis of the benefits of having a global digital currency. The report came after Facebook announced the creation of their Libra token — a stablecoin, backed by a basket of fiat currencies.
Facebook’s decision, however, met strong negativism from regulators and global economy leaders from the G7. According to VoxEU, Facebook’s plans jeopardize users` privacy, and Facebook may use the gathered data for commercial use.
Given the negativism, VoxEU looked into the best-case scenario that can occur after the creation of a global digital currency such as Libra. The critical element of Libra’s whitepaper is cutting down the costs for cross-border remittances. “If a global digital currency sees mass adoption, it could become a valuable alternative for some of the weakest “spots” in the international monetary systems.
VoxEU provided as an example the dominance of the United States Dollar (USD), which was also highlighted by Bank ok England’s governor Mark Carney. VoxEU also raised concerns about volatility and the quantity of backing the Libra coin to mitigate it.
Facebook’s Libra team decides to create a stablecoin — a fiat currency basket-backed token. The price volatility would be tied to the price movement of any single currency in the basket.
The other key element in Libra’s whitepaper is reducing international remittance costs. With the World Bank confirming 6,84% of the $600 billion annual remittances are transaction costs, Facebook’s projects give retail customers the chance to minimize banking fees and to exclude intermediaries in the transaction chain.
VoxEU, however, asks the question, “Do we need a brand new crypto project when remittance companies can utilize the same Blockchain technology and make the nowadays inefficient settlement process faster and more secure?”. The analysis continues with a disbelief about Libra solving the issues related to global technology adoption and the transparency of the network.
CEPR’s analytics team concludes that although having a global digital currency may be a thing to consider, it doesn’t mean it would need to be Libra. VoxEU’s main concerns about privacy, operational risks, data control, regulatory compliance, and currency domination. VoxEU again cited Bank of England’s governor Mark Carney about “creating a network of Central Banks, who will run a new cryptocurrency — Synthetic Hegemonic Currency.”