Facebook Libra a ‘catalyst for reform’: Swedish central bank chief

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The announcement of Facebook’s cryptocurrency project Libra has served as a catalyst for central banks worldwide considering issuing their own cryptocurrencies, according to the head of Sweden’s central bank.

In an interview on CNBC’s Squawk Box Europe this week, Stefan Ingves, governor of the Riksbank, described Libra as an “important catalytic event” in urging central banks to focus on their own cryptocurrency plans.

It has been an incredibly important catalytic event to sort of shake the tree when Libra showed up out of the blue, and that forced us to think hard about what we do.

He noted, “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… But if I were to start issuing 20-kilo copper coins the way we did in 1668, then we soon would be out of business.”

Sweden is currently experienced a rapidly decline in cash payments, with many businesses and retailers across the country now shunning cash altogether in favor of digital payments.

As a result, Ingves said the bank had been actively considering its options around issuing a cryptocurrency to better serve consumers and businesses in the country: “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.”

The bank has said it has been considering proposals for an e-krona, which could be rolled out as a pilot later this year.

Separately, RBC Capital Markets have cautioned that if regulators stamp out Libra’s future in the developing world, it could clear the way for China’s central bank digital currency (CBDC) to become a global standard. They wrote:

If U.S. regulators ultimately dismiss Libra and decide not to draft regulations to encourage crypto innovation in the U.S., China’s CBDC may be strategically positioned to become the de facto global digital currency in emerging economies.

That may happen naturally, as Ingves said that in the case of Facebook, Libra was exposed to the same risk as other ill-fated forms ‘private sector money.’

“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,” he said.

The remarks come amid another difficult week for Libra, which saw multiple high profile names withdraw from the Libra Association, including Mastercard, Visa and eBay.