Digital currency has on and off been a hot topic over the last years. Every growth and decline has been described and discussed, and virtually everyone has an opinion about this subject.
Banks were also one of them and have always been opposed to the idea. The whole concept of a nonstable coin, not backed up by actual value, was a recipe for disaster according to many banks.
However suddenly banks are changing their opinion on this matter. In July Facebook has introduced a stable coin called Libra. Such stable coins are known for being less volatile and are backed up by ‘stable’ assets which changes the core argument of banks. The concept of Libra would be similar to that of WeChat, where you can pay through WhatsApp. This has been a wake-up call as many banks see this as a different and more serious threat to their traditional way of business. The big reach Facebook has is one of the reasons they feel they should join this development. The People’s Bank of China is taking Libra (and all other related developments) very seriously and has been digital currency since 2014. This could be because WeChat is such an essential platform in china. You could say that Libra has the potential to be the European WeChat so it might be wise to operate similarly to Chinese banks.
However, a couple of hours ago PayPal has announced that they are dropping out of the deal. PayPal has not explained its reasons behind it but says they are still supportive of the idea of Libra. Even though PayPal was one of the first members of the Libra association, there are still some other prominent members in the association such as payments company Visa, ride-hailing app Uber and humanitarian charity Mercy Corps. Therefore PayPal leaving does not have to be the end.
The question does however rise, is Libra actually a potential threat to the original banking industry? Their first response has been to take them seriously, but this might alter because of the developments of PayPal. It is unclear what the next step will be in this development but as always with digital currencies, it is probably interesting and unexpected.
Sources:
BBC, 2019. Accessed at: https://www.bbc.com/news/world-australia-49944421
Technology review, 2019. Accessed at:https://www.technologyreview.com/s/614472/should-central-banks-issue-digital-currency-suddenly-its-an-urgent-question/
