Surely the G7 has more pressing needs than fretting over Libra? It would appear not as, according to Reuters, the G7 (United States, Canada, Japan, Germany, France, Italy and the United Kingdom) had Libar on the agenda to discuss at a recent G& meeting at the beginning of October 2020. It is somewhat ironic, as apparently most of the G7 members are currently exploring the possibility of launching their own CBDC (as it is a very inclusive payment mechanism), yet they wish to ban Libra.
Reuters has reported, “G7 require payment systems to be supervised and regulated to guarantee:
Without these guarantees, the risk is that coins like Libra are used for money laundering and terrorism financing, or other illegal purposes”.
However, is the G7 more concerned that Libra is, indeed, too closely associated with Facebook? Given Facebook’s 2.7billion active users in Q2 2020, which is almost 3.5 times the population of the citizens within the G7’s countries, it is easy to see why the conglomerate is nervous. In the light of almost zero interest rates globally, governments have lost control over their ability to stimulate economic growth by manipulating interest rates. One suspects the G7 subsequentially do not wish to see a loss in control over the effectiveness of its currencies, despite the fact that in January 2020 three of them (France, Germany and Italy) embraced the Euro.
Bank of England’s view on the opportunities a CBDC presents
Source: Bank of England
Whilst the G7 has been fretting about Libra, the Chinese have already launched their own CBDC. Chinese citizens have been fast adopters of making digital payments using their mobile devices, courtesy of Wepay or Alipay, which is possibly why the Chinese have said
little about Libra - but, then again, Facebook is banned in China! According to the New York Times, Libra’s launch in June 2019 encouraged China to push ahead with its plans for its own CBDC. In a trial encouraging its citizens to use its new Digital Currency the government is giving away 10 million e-yuan ($ 1.5 million) randomly selecting 50,000 people, each of whom will receive 200 e-yuan ($30). However, the catch is: the winners must spend their e-yuan between October 12th - 18th at one of the 3,389 authorized outlets, i.e. use it or lose it. Is this a sign of things to come? Does this mean, should the Chinese wish to stimulate spending in a particular sector, they could give out e-yuan and put a limit on where the digital money is spent, and by when? The Japanese seem to be unsure as whether to deem it a threat that China has launched its CBDC, with Okamura, Japan’s vice-finance minister, declaring, “First-mover advantage is something we should be afraid of." However, a week later Kamiyama, the man responsible for investigating CBDC at the Bank of Japan, was reported as pronouncing, “The first-mover advantage may easily turn into a disadvantage, and that no single digital currency will dominate”.