The threat of Libra (now Diem) is no longer relevant. What explains the reluctance of the United States to launch digital currencies (CBDC)? The US Fed estimates that it will take years for the dollar.
The imminent launch, without consultation with Libra’s regulators, was putting pressure on central banks. In return, they were raising their voices and accelerating their digital currency plans.
The pressure now seems to have subsided, as have ambitions to issue CBDCs in the short term. As far as the US Federal Reserve is concerned, the urgency is clearly not there. This is the unambiguous message of its director.
“We don’t feel like or need to be first,” says Powell. The hegemony of the dollar is the main reason. “We already have the advantage of being first because the U.S. dollar is the reserve currency,” says the Fed boss.
Thus, according to Powell, the issuance of a CBDC will take “years rather than months”. All is not at a standstill in this sector, however. Preliminary studies on a digital dollar have been launched.
The Fed is “investing heavily” on the subject in order to understand the CBDC’s underlying technology and policy issues. And the trigger, Powell acknowledges, is private sector activity in this market.
This threat, however, would be less significant. “At some point, they [users of private currency] find out that it’s not money and that it’s a very bad thing that we have to avoid,” Powell says.
Regulating stablecoins and cryptocurrencies rather than innovating
The priority today is therefore to provide “better regulatory responses” to the global stable corners. This is also Europe’s current policy, which in September 2020 adopted new rules.
In Europe, too, the issue of a digital euro is not an emergency in the short term. The President of the ECB hopes to see the project come to fruition within five years. A few months earlier, her “intuition” had led her to believe that it would be created within 2 to 4 years.
Priority is therefore given to regulation, including current cryptocurrencies such as Bitcoin. This week, Christine Lagarde singled out the crypto-asset as too speculative according to her. But above all, the boss of the ECB calls for global regulation of Bitcoin. The reason? Its use for money laundering purposes. Tired old song.