Libra – Major attack on the world’s central banks?

Hardly a day goes by without one or more representatives of politics, financial supervision and central banks commenting on the crypto currency Libra planned by a consortium around the tech giant Facebook. And it is mostly loud criticism or at least admonitory words that are to be heard. This shows above all one thing: even if the Libra project is at a preliminary stage, the private global single currency is perceived by many as serious competition for the established monetary and financial system. This is not least due to the large user base and the financial strength of the companies involved.

It is certainly not the goals set by the initiators that inspire fear in the critics. Who would have anything against opening up access to financial services, especially to those people in the world who have so far been excluded – provided they only have a smartphone and Internet access? The idea of making financial transactions as easy, fast, cheap and global as possible is also an expression of people’s changing expectations of what a financial system and its stakeholders should do today – at a time when sending messages, images and other data in a matter of seconds is commonplace.

However, the fears of Libra critics are not entirely unfounded. In fact, Libra has the fundamental potential to experience worldwide dissemination and acceptance. In an extreme case, in which the crypto currency gradually displaces traditional currencies in the everyday use of citizens and even creates its own credit and capital market, the central banks lose central elements of monetary policy strategy and existing instruments. The control of the economic framework conditions to achieve the specified objectives of monetary policy would therefore be made more difficult, if not impossible.

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