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Archive » July 2020 » Digital currencies, the new challenges. Banks, Central banks and the Libra case

Digital currencies, the new challenges. Banks, Central banks and the Libra case

Paolo Mottura
July 2020 - n. 7-8
Keywords: Moneta, monete digitali, banca, banca centrale, FinTech, Bitcoin, stablecoins
Jel codes: E42, E51, E58, G21, G23

Digital currencies are the subject of study and particular attention by the Authorities. The Bitcoin model identifies the currencies that are generated by specific algorithms, regardless of the intervention of an issuer; the high volatility of the value prevents its monetary function. Stablecoins are characterised by an issuer, by the anchoring to a national currency and by the reserves to safeguard their stability. Both types failed to replicate the classic functions of money and did not actually enter into circulation. The competitive entry of a new currency needs an extended diffusion, supported by an efficient payment system. In this regard, the Libra Project launched by Facebook has the potential advantage of generating a rapid network effect, thanks to the capillarity of social networks. The actual launch of Libra does not seem imminent, due to the problems observed and for reasons of compliance with regulation. However, the synergy between Bigtech and Fintech players is able to propose a new alternative monetary system, consisting of a new digital currency, contained in digital wallets. In this scenario of strong challenges and potential threats it is up to banks to implement new competitive strategies and Central banks have to assess whether (and how) to digitize their currencies.

 

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