The threat of bitcoin and cryptocurrencies were mostly laughed off by central bankers before this year but social media giant Facebook’s libra project changed that.
The bitcoin price has doubled since the beginning of this year due to interest in bitcoin and crypto from the world’s biggest technology companies but its recovery stalled after Facebook’s plans looked likely to attract regulatory scrutiny.
Now, outgoing European Central Bank (ECB) executive board member Benoît Cœuré, who last year described bitcoin as “the evil spawn of the financial crisis,” has outlined plans for a European “central bank digital currency” to rival the likes of Facebook’s libra and bitcoin.
“A central bank digital currency could ensure that citizens remain able to use central bank money even if cash is eventually no longer used,” said Cœuré, speaking at a joint conference held by the ECB and the National Bank of Belgium this week.
“A digital currency of this sort could take a variety of forms, the benefits and costs of which the ECB and other central banks are currently investigating.”
Facebook’s plans to launch its own private digital currency, governed by a group of some 20 different companies, provoked a powerful reaction from world leaders and central bankers earlier this year, with many fearful libra would undermine countries’ economic control.
In August, Bank of England governor Mark Carney, who has previously poured scorn on bitcoin and its crypto peers, has said a global digital currency, like bitcoin, could replace the U.S. dollar as the world’s reserve currency.
“The current situation has attracted new initiatives that aim to overcome shortcomings in cross-border retail payments by building a new separate payments ecosystem,” Cœuré said, without directly addressing bitcoin, crypto or Facebook’s libra project.
“These initiatives highlight the rapidly rising consumer demand for payment services that work across borders and that are also faster, cheaper and easier to use. Among younger people in particular, there is a willingness and curiosity to use new technologies and try new providers.”
A draft European Union document, seen by newswire Reuters this month, revealed the trading bloc is considering a common approach to cryptocurrencies, including possibly banning projects deemed too high-risk.
The plans could be adopted by E.U. finance ministers as soon as next month, according to Reuters, and would escalate an E.U. regulatory campaign against cryptocurrencies.
Cœuré also warned “there are clear signs that Europe is at risk of losing its economic edge,” as the likes of Facebook and countries including China look to develop their own digital currencies.
“A pan-European strategy that facilitates instant, secure and inexpensive payments—both online and in brick and mortar stores—has the potential to make up lost ground and meet the rising needs of consumers for efficient cross-border payments,” Cœuré, who was appointed head of the newly created innovation hub at the Bank for International Settlements (BIS) this month, added.
Earlier this month, former ECB president Jean-Claude Trichet slammed bitcoin and Facebook’s libra project, warning bitcoin is “not real” and not the future of money.
Meanwhile, outspoken bitcoin critic Nouriel Roubini, professor of economics at New York University’s Stern School of Business, has declared a “total crypto-apocalypse,” due to bitcoin’s recent wild price swings.
“[Bitcoin] down 6% from peak; other top 10 cryptocurrencies down 80% from peak. 1,000s of other shitcoins down 95% to 99% from peak,” Roubini said via Twitter, branding the situation “crypto-carnage.”
“Despite the utopian claims of its proponents, bitcoin is a right-wing nightmare which facilitates tax evasion, money laundering and environmental degradation,” Roubini said earlier this year.
However, some in the bitcoin and cryptocurrency industry have argued central bank and government-backed digital currencies miss the point of bitcoin.
“There is an appetite, a huge and growing one, for currencies that are not controlled by central banks and governments,” said Nigel Green, chief executive of financial advisory group deVere. “Supporters believe that these digital currencies are part of the antidote to what they see as the ills caused by the traditional system.”
From next year, Cœuré will help central banks explore the benefits of financial technologies such as a digital currency at BIS.
Cœuré will work alongside BIS head Agustin Carstens who has described bitcoin as “a combination of a bubble, a Ponzi scheme and an environmental disaster.”
Earlier this year, Christine Lagarde, who has recently replaced Mario Draghi as president of the European Central Bank (ECB), warned that cryptocurrencies are “shaking the system”—potentially signalling a change in the ECB’s approach to bitcoin and crypto.