During the Official Monetary and Financial Institutions Forum (OMFIF) held in London on Tuesday, a French Central Banker stated in his speech that the world requires a global regulatory framework for cryptocurrencies.
The deputy governor of the Bank of France, Denis Beau, commented on the issue of the lack of a unified regulatory stance, saying that ‘there is indeed a need for overall constituency to prevent regulatory arbitrage under the ‘same activities, same risks, same rules principle.’
The need for a standardized regulatory framework stems from the fact that projects such as Libra, who could potentially destabilize the global economy, are preparing to launch in an environment where there are no established regulations that can keep the projects under control.
In his speech, the deputy governor compared Facebook’s crypto project to central bank-issued digital currencies (CBDC) and stated that the asset ‘may achieve significant market power, thus posing risks to security and financial stability.’
The concept of a CBDC was first introduced by the Bank of England, after which several nations such as Sweden and China have made steps to actively develop their own national cryptocurrency.
While Beau did not provide any examples of how threats like Libra could be combated, he expressed the need for a global and unified regulatory framework. Additionally, Beau believes that Central Banks should experiment with their own CBDCs, which may potentially show financial institutions the real-world effects of integrating disruptive technologies into traditional banking.
Commenting on the positive sides of cryptocurrencies, Beau said that he is bulling on the technology behind it and that it may assist the global financial ecosystem with replacing costly cross-border transfer mechanisms. As such, distributed ledger technology may replace legacy systems encountered in most financial institutions.
Bullish on blockchain, bearish on crypto
Despite his optimistic stance on blockchain technology, the Central Governor does not believe that today’s cryptocurrencies can help the global economy. Stating that the new digital asset class is too volatile and not effective for transferring money. Furthermore, cryptocurrencies lack government backing, which he believes is fundamentally required for them to become a trustworthy store of value.
The deputy governor believes that the inclusion of cryptocurrencies could bring material risks into modern payment systems, which can bring ‘instability, fragmentation, and fraud’ if not corrected.
Because of that possibility, Denis Beau thinks that central bankers should consider new ways of offering their money supply and that CBDCs can fill that gap. ‘CBDC is, in my view, worth considering, if not desirable,’ stated the deputy governor of the Bank of France.