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Germany’s Central Bank: Gov’ts Should Be Neutral on FB’s Libra

Germany’s central bank said that potential benefits of Facebook’s Libra should be made possible despite associated risks.

Potential benefits of Facebook’s Libra should be made possible despite the existing regulatory uncertainty and associated risks, Germany’s central bank said.

In a monthly bulletin called “Crypto tokens in payment transactions and in securities settlement” released on July 22, the Bundesbank evaluated potential advantages and shortcomings of central bank digital currencies (CBDCs), as well as stablecoins such as Facebook’s widely-discussed crypto project Libra.

Regulation of Libra should be as technology-neutral as possible, Bundesbank says

In the document, Germany’s central bank stated that global innovative projects such as Libra should not be made impossible as they aim to increase prosperity and transaction costs.

However, global regulators should ensure that a number of important standards such as security, monetary and financial stability are not negatively affected, and payment transactions are not compromised, the bank wrote. The Bundesbank stressed that competition in the European payments should be ensured to stay.

At the same time, the regulation should not hinder innovation, the bank emphasized:

“ […] a government should be as technology neutral as possible, so that the benefits of innovation can be made available for the financial sector.”

The bank added that a number of important technical, organizational, and regulatory questions regarding Libra Association is still open, while there are also some speculative considerations for its potential impacts. As such, the bank stated that global supervisory authorities and central banks should keep carefully monitoring and evaluating the project.

CBDCs and stablecoins can impact central banks

In the document, the Bundesbank considered CBDCs and stablecoins as two major recent developments that can affect the role of global central banks. 

Outlining potential general advantages presented by CBDCs, the Bundesbank said that it sees no need of CBDCs for non-banking entities, as they can be used by them as a substitute for commercial bank money, which in turn could have a negative impact on credit supply.

The new crypto-related statement by the Bundesbank echoes recent reports on Bundesbank President urging global regulators to not suppress projects such as Facebook’s Libra in their infancy. Jens Weidmann reportedly stated at a G7 event that regulators should be careful to avoid inadvertently suppression of innovative concepts before all the details have been clarified.

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Palestinian Authority Considering Crypto to Replace Israeli Shekel

The Palestinian government plans to use cryptocurrency as an alternative to the Israeli shekel fiat currency, according to the country’s prime minister.

Palestinian Prime Minister Mohammad Shtayyeh reiterated that his government is considering using cryptocurrency as an alternative to the Israeli shekel fiat currency, English-language local media Al-Monitor reports on July 22.

Shtayyeh said at the opening of the Palestine Center for Computer Emergency Response in Ramallah on July 9 that he’ll consider every possibility to enhance the freedom of Palestinian economy that Israel won’t be able to block. 

During his first appearance on Palestine TV, after first taking office in April, he reportedly said:

“The Palestinian economy has about 25 billion shekels [$7 billion] circulating in the local economy, but we’re not forced to remain dependent on the shekel.”

Al-Monitor explains that the Paris protocol signed in April 1994 by Israel and the Palestinian Liberation Organization vested the Palestinian Monetary Authority (PMA) with the powers of a central bank but without the ability to issue banknotes. The protocol furthermore reportedly stated that the Israeli shekel shall be used “as means of payment for all purposes including official transactions.” 

Economic and social sciences professor at Najah University in Nablus told the outlet:

“If Palestine has its own currency, will it be able to prevent Israel from withholding tax clearance funds or controlling crossings and the movement of exports and imports? The problem of the Palestinian economy is not the currency but rather a complex economic and political reliance on Israel.”

Furthermore, he pointed out that 170,000 Palestinians earn their salaries in shekels, and 80% of the transactions in Israel are in this currency. He concludes:

“Israel won’t accept dealing with another currency, and the shekel surplus predicament in Palestine will remain unchanged.”

As Cointelegraph reported in May 2017, Palestine already voiced intentions to develop a national cryptocurrency at the time.

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European Central Bank Exec: Libra Won’t Launch Until Regulators Are Satisfied

Benoit Coeure of the European Central Bank said that Libra cannot launch until regulators are satisfied it is safe.

Benoit Coeure, a board member of the European Central Bank, said that Facebook’s Libra coin will not launch until global regulators are satisfied. 

Speaking to Reuters at the G7 summit in Chantilly, France on July 18, Coeure said that the proposed stablecoin must be guaranteed to be safe for users before it can launch:

“You’ve got to be safe, robust and resilient from day one. It’s not a learning process: either it works or it doesn’t.”

Coeure stated that guaranteeing the protection of user privacy and ownership rights may require significant consideration and lengthy discussion by regulators:

“Down the road we might find that there are gaps or inconsistencies that would require a prolonged discussion by regulators on how to do it differently. Authorities are not going to let any such projects happen before we have answers to our questions and before we have the right regulatory framework.”

Earlier this month, Coeure called for fast action from global regulators in regard to Libra. The ECB official said that allowing the introduction of a totally new asset like Libra on such a large scale, without proper regulations and safeguards, would be irresponsible. 

Coeure also stated that the rapid development of digital and crypto assets has exposed gaps and shortcomings in existing regulatory structures and has underlined how slow banks are to adopt new technologies.

“All these projects are a rather useful wake-up call for regulators and public authorities, as they encourage us to raise a number of questions and might make us improve the way we do things.”

The official’s G7 working group on stablecoins will reportedly explore the issue leading up to the International Monetary Fund’s yearly meeting in October, whereupon he will purportedly pass the work along to the Financial Stability Board.

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Bank of Thailand Is Open to Discuss Libra, Concerned Over Security

Bank of Thailand governor Veerathai Santiprabhob said that the institution is open to discuss Facebook’s Libra stablecoin with the company.

Bank of Thailand governor Veerathai Santiprabhob said that the institution is open to discussing Facebook’s Libra stablecoin with the company, local media Xinhuanet reported on July 19.

Per the report, Santiprabhob made his remarks at the Bangkok FinTech Fair on July 19, pointing out that Facebook had already contacted the central bank many times. He also noted that the institution had established a new team to study Libra’s whitepaper, but their analysis will take time. “We are not going to rush into a decision of Libra as yet,” Santiprabhob reportedly said, continuing to emphasize the importance of security:

“All kinds of new digital money have been emerging, therefore the Bank of Thailand monitors all and don’t give favoritism to any particular financial service. Security in financial services is the bank’s top priority. It will take time.”

Santiprabhob reportedly said that Libra cannot simply replace the Thai baht, concluding that “Libra cannot just step in and replace all currencies and digital money.”

As Cointelegraph reported earlier this month, Fiscal Policy Office legal officer Sumaporn Manason argued that Libra will likely run up against difficulties entering Thailand as the cryptocurrency does not fall under any local financial legislation currently existing.

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European Central Bank Policymaker Says Stablecoins Not Cause for Alarm

ECB’s governing council Jens Weidmann has said that while stablecoins offer opportunities for prosperity, users should be vigilant.

A European Central Bank (ECB) official has stated that users should be aware of the risks associated with the stablecoins use, but not to be alarmed.

As Reuters reported on July 18, member of the ECB’s governing council and president of the Deutsche Bundesbank, Jens Weidmann said that stablecoins — digital currency designed to minimize price volatility by being pegged to another asset — offer users opportunities for prosperity, however users should be vigilant in regards of the associated risks.

Weidmann delivered his comments at a news conference at a meeting of the G7 finance ministers and central bankers. “There is no reason to be alarmed but there is reason to be vigilant,” Weidmann stated.

Weidmann also spoke in favor of Facebook’s Libra cryptocurrency project. He specifically argued that global regulators should not suppress the project in its infancy, adding that digital currencies such as Libra can be attractive to consumers in the event that they deliver on their promise.

However, a range of other policymakers do not share Weidmann’s view on Libra, with French finance minister Bruno Le Maire saying that the G7 “cannot accept private companies issuing their own currencies without democratic control.”

Brad Sherman, a United States Democratic congressman, recently claimed that “Mark Zuckerberg is sending a friend request to oligarchs, drug dealers, human traffickers and terrorists” by launching Facebook’s Libra cryptocurrency.

Notably, at the G7 conference, the Financial Action Task Force — a G7-initiated intergovernmental organization that promotes legal, regulatory and operational measures that aim to fight money laundering on a global scale — approved a new, global cryptocurrency payments network that would be similar to Japan’s proposed SWIFT.

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Bundesbank Head Says Don’t Suppress ‘Innovative Concepts’ Like Libra

Bundesbank President Jens Weidmann spoke in favor of Facebook’s Libra during a recent G7 event, a report says.

The head of Germany’s central bank Jens Weidmann spoke in favor of Facebook’s Libra during a recent G7 event.

Bundesbank head warns against suppressing innovation

Weidmann, Bundesbank President and the Governing Council member of the European Central Bank, argued that global regulators should not suppress the project in its infancy, according to an email newsletter in a shared by eToro senior market analyst Mati Greenspan on July 19.

According to the letter, Weidmann reportedly supported the Libra project during a recent G7 meeting, arguing that digital currencies such as Libra can be attractive to consumers in case if they deliver what the promise.

The head of the Bundesbank urged the global community to allow time to initiatives like this, emphasizing the nascent stage of the Libra’s development and warning against inadvertently suppressing innovative concepts before all the details have been clarified.

Previously, Bundesbank’s representative Burkhard Balz claimed that crypto does not pose a threat to financial stability.

G7 cannot accept private companies issuing currency

Meanwhile, G7 finance ministers have recently warned that digital currencies such as Libra pose risks for the world’s financial system if they are not regulated tightly. During a news conference on July 18, French finance minister Bruno Le Maire reportedly said that G7 “cannot accept private companies issuing their own currencies without democratic control.”

Weidmann’s new supporting word for Libra somewhat contradicts with some of his previous remarks about digital currencies. In late May, Weidmann expressed concerns over the potential risks of digital currencies, including destabilization of the financial system. At the time, the official said that easy access to digital currencies could speed up a collapse of lenders, which would fundamentally alter the business model of banks even in a good economic environment.

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Bank of English Governor on Libra as a Solution to Financial Problems

Mark Carney discussed the problems Libra must address prior to launch, while noting the problems it aims to solve, commenting that they do indeed need a solution.

Bank of England governor Mark Carney said that people need to acknowledge the issues Facebook is attempting to solve with Libra, regardless of the project’s potential downsides. Carney delivered his remarks at the Financial Stability Report press conference as seen on the Bank of England’s YouTube channel on July 11. 

Carney said:

“It’s way too expensive to do domestic payments. It’s way too slow, and that hurts consumers and businesses. It stifles innovation, and it’s far too expensive to send money cross-border, and there are huge financial inclusion issues related to that and costs related to that. So, while we are trying to address all these issues, we have to absolutely acknowledge the problem that they’re trying to solve. And if it’s not this, we’d better have some answers for what else it is.”

However, Carney also believes that Libra, due to the massive scale of the project, has to be virtually perfect at the outset — at least from a financial security standpoint — in order for it to be released at all.

“It’s either successful or it isn’t. If it’s successful, it becomes systemic, because it would involve a very large number of users. And if you’re a systemic payment system, it’s 5-sigma. You have to be on all the time. You can’t have teething issues. You can’t have people losing money out of their wallets … The standards are in a different zip code — to use the American term.”

Carney went on to list a number of other problematic areas that Libra needs to address. Basis risk, rebalancing risk, managing underlying assets, facilitating anti-money laundering and counter-terrorism are all areas he believes need to be adequately addressed prior to launch. 

As previously reported by Cointelegraph, U.S. Federal Reserve Chair Jerome Powell recently made similar remarks about Libra, indicating that it needs to reach a high bar before the cryptocurrency project can proceed. However, in an earlier statement, Powell noted that the Federal Reserve does not “have plenary authority over cryptocurrencies as such,” though he claims the Fed still has “significant input into the payment system.”

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Iran Plans to Allow Crypto Mining, Central Bank of Iran Governor Says

Governor of Iranian Central Bank revealed that the government has prepared parts of an executive law to authorize crypto mining.

Iranian authorities are planning to authorize cryptocurrency mining, as the governor of the Central Bank of Iran (CBI) declared, news agency PressTV reported on July 10.

CBI governor Abdol Hemmati reportedly claimed that the Iranian government has approved some parts of an executive law that would authorize mining of cryptocurrencies such as Bitcoin (BTC) in Iran. Hemmati’s claim follows a lengthy back-and-forth on the legal status of cryptocurrencies in Iran.

As Hemmati explained, the planned law will require crypto mining in Iran to abide with the price of electricity for export, rather than allowing miners to use the heavily subsidized internal energy grid. According to the report, Iran exports power to neighboring countries at prices from 40-100% higher than it provides internally.

According to unconfirmed reports, Chinese miners have been present in Iran due to the cheap energy prices for cryptocurrency mining.

Hemmati continued that cryptocurrency miners in Iran should contribute to the country’s economy, rather than letting mined Bitcoin pour abroad. He also added that CBI will not authorize any currency whose values are “decided” by the price of the national currency or gold, among others.

The new announcement followed reports that Iranian authorities planned to cut off power to crypto mining due to abnormal surge of electricity consumption, which was allegedly due to increased rates of crypto mining in the country. Accordingly, Iranian government subsequently confiscated about 1,000 units of Bitcoin mining hardware units from two mining operations.

On July 8, deputy governor for new technologies at the CBI reportedly said that buying and selling crypto is illegal in Iran, citing local anti-money laundering rules.

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German Central Bank: Cryptos Are Not a Threat to Financial Stability

Central Bank of Germany representative Burkhard Balz says that cryptocurrencies do not pose a threat to financial stability.

Central Bank of Germany representative Burkhard Balz said that cryptocurrencies do not pose a threat to financial stability during a talk at the European Parliament reported a post published on the institution’s website on July 9.

Burkhard Balz, Member of the Executive Board of the Deutsche Bundesbank, stated that “crypto-tokens currently do not pose a risk to monetary or financial stability.” Furthermore, he also noted that “gaps may occur where they fall outside the scope of regulators’ authority or where there is an absence of international standards.”

This idea is in line with the claims of Spanish law enforcement representatives, who pointed out that Bitcoin ATMs show a gap in European Union’s Anti-Money Laundering (AML) regulations, as Cointelegraph reported earlier today. Balz also warned in his talk that any increase in the popularity of crypto assets warrants close scrutiny. Still, he also expressed high hopes for digital transformation brought on by artificial intelligence, distributed ledger technology, and cloud services, saying:

“We are not talking about “evolution,” about banking adapting to the wants and needs of a digital generation – we are talking about a true “disruption” that may change the financial sector for good.”

Last week European Central Bank executive board member Benoit Coeure said that financial regulators must act fast to prepare for Facebook’s Libra stablecoin.

As Cointelegraph reported last month, Australia’s central bank said Bitcoin and cryptocurrencies would remain outside mainstream payments.

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CBDCs Hold No Interest Without Full Anonymity: Banxico Deputy Governor

The deputy governor of Mexico’s central bank argued that a CBDC of “less than full anonymity” is not interesting for the public.

Central bank digital currencies (CBDC) will not hold much interest for the general public unless they provide full anonymity, the deputy governor of Mexico’s central bank has argued. The executive’s remarks were published by the Bank for International Settlements on July 11.

Javier Calafell, deputy governor of the Bank of Mexico (Banxico), delivered a speech on potential strengths and weaknesses of CBDC during an event held by the United States Federal Reserve Bank and the OMFIF Foundation on July 9.

While outlining CBDCs’ advantages such as security of payments and cost effectiveness, Calafell believes that there are a number of significant factors that prove their ineffectiveness. According to the official, the existing digital systems already satisfy payment functions of CBDC, while its “back-up” function does not make much sense since the central bank handles the main part of the payment systems.

Calafell argued that cash is unlikely to see a significant decline in demand in the foreseeable future, which makes it difficult to expect that the issuance of CBDCs will change the trend meaningfully.

The Banxico official highlighted the issue of privacy as a major impediment to the adoption of CBDCs, citing “reputational risks” associated with a fully anonymous CBDC. The general public will not be interested in a CBDC if it does not provide sufficient privacy, Calafell declared, claiming that a “CBDC design with anything less than full anonymity is likely to dent interest among the general public.”

At the same time, the Banxico executive cautioned against disregarding the subject of CBDCs, as well as issues surrounding the technology. Calafell outlined that CBDCs are “still in a very early stage of development,” while the global community should not miss the potentials of new technologies.

Calafell concluded:

“In any event, while we have to be open and attentive to new technologies, it is also true that w

need to be cautious in adopting them, especially when, as in the case of CBDCs, we are dealing with an issue with potential major implications and still many unknowns.”

Previously, the Banxico published a circular requiring local crypto exchanges and banks to receive a permit from the bank in order to provide crypto-related services.

Recently, the International Monetary Fund released a report forecasting that global central banks will be issuing digital currencies in the future.