G7 finance ministers and central bank governors ©Xander Heinl/photothek.de

Same risks, same rules

The G7 finance ministers and central bank governors seek to jointly prevent existing regulation from being undercut by “stablecoins” such as Libra. This point was emphasised unanimously by Bundesbank President Jens Weidmann and Federal Finance Minister Olaf Scholz at the close of the G7 meeting in Chantilly, France. “The ‘same risks, same rules’ principle must be upheld in order to stop new shadow sectors emerging in the finance system,” as Mr Weidmann put it at the press conference. The G7 countries wish to conduct joint efforts to prevent regulatory arbitrage so that issuers of stablecoins do not relocate to where the rules are the most lenient. Finance Minister Scholz emphasised that it was about harnessing the opportunities provided by technological progress in the digital economy without privatising key government tasks. He added that currencies belonged in the hands of democratically legitimate governments and central banks.

Central bank tasks must have priority

In the Bundesbank President’s opinion, globally circulating stablecoins could impinge on some classic central bank tasks: ensuring stable payment systems, safeguarding financial stability or preserving the effective transmission of monetary policy. Mr Weidmann stressed that “the fulfilment of statutory central bank tasks must take priority over private sector business policy interests.” Although, according to Mr Weidmann, stablecoins could also be quite attractive to consumers, especially in those places where currencies are not stable and payment systems are underdeveloped, consumers also needed to realise that using stablecoins could involve credit risk, liquidity risk and exchange rate risk.

Create pan-European solutions

Mr Weidmann thinks, however, that the debate on stablecoins could also provide key stimulus, as it underscored the demand for low-cost, convenient and fast payment media across national borders. In his view, cross-border payments are often still relatively slow and expensive. “That is why the discussion should be a wake-up call to private market agents to provide attractive procedures,” Mr Weidmann continued. This included modernising the payments landscape and creating pan-European solutions. He believes that the Eurosystem’s TIPS real-time payment system provides a good basis for this.