Facebook’s new Libra stablecoin got a break in Europe last week with the announcement that Christine Lagarde has been nominated to be the new head of the European Central Bank, says eToro’s senior market analyst, Mati Greenspan.
That’s not to say that the cryptocurrency the social media giant and 27 other partners such as Visa and PayPal announced on June 18 has an easy road ahead of it. Right from the start, the continent’s three most powerful central bankers—Bank of England Governor Mark Carney, Deutsche Bundesbank president Jen Weidmann, and French Finance Minister Bruno Le Maire—all expressed serious concerns about Libra.
Weidmann warned that Libra and other stablecoins could undermine and disrupt traditional banks, according to Reuters, while Carney called for “the highest standard of regulations,” and Le Maire warned that “it is out of the question that [Libra] becomes a sovereign currency,” just after it was announced.
With immediate access to Facebook and its WhatsApp messaging service’s combined 2.7 billion users, Libra could challenge national currencies, many regulators and politicians fear.
LaGarde, however, “is quite forward thinking and she’s familiar with digital assets,” Greenspan told Modern Consensus. “I think she’d be a good figurehead and role model to lead the European side of oversight.”
That’s a good thing, as one of her ECB colleagues, Executive Board member Benoît Cœuré called Libra “a wake-up call for regulators and public authorities,” Cœuré said on July 7, according to Bloomberg. “It’s out of the question to allow them to develop in a regulatory void for their financial service activities, because it’s just too dangerous.”
Lagarde’s positive outlook has focused mainly on central banks issuing their own cryptocurrencies, and settlement coins like JPMorgan’s JPM Coin and Ripple’s XRP, Greenspan said. “She hasn’t really come out in strong support of bitcoin, for sure, but she hasn’t knocked it too much,” he said, adding that “she’s walked a fine line with bitcoin so far.”
What she has done is point out that digital assets are disrupting the financial sector. While that’s not a bad thing, she told CNBC in April, “[w]e don’t want innovation that would shake the system so much that we would lose the stability that is needed.”
As for Facebook’s new entrant, what matters is less whether Lagarde is in favor of Libra or against it, said Greenspan said. As head of the ECB, her role is to provide leadership on regulatory oversight. “And I think that she’s the perfect person to do that,” he added.