More than 50 central banks around the world are working on digital currency projects. However, the former head of Banque de France is sceptical.
Christian Noyer, ex-governor of the French central bank, is concerned that people’s privacy and central banks’ ability to conduct monetary policy could become impaired by adopting new digital currencies. The current Banque de France, Francois Villeroy de Galhau, is one of the people who have called for a centrally-run digital currency.
While many central banks have launched their own initiatives on the back of projects like the Facebook-led cryptocurrency Libra, Noyer told the Financial Times that the mood is still hesitant.
Given the scale of the projects, he was also uncertain whether they would launch their projects within the next decade or not. “I don’t think we are close to the departure lounge, but the fact that they want to study it means a lot of work will continue this year,” Noyer said.
He also noted that central bank policy makers are not too keen on private initiatives like Libra. Mark Zuckerberg, CEO and co-founder of Facebook, endured a serious grilling by US lawmakers in October, trying to sooth their worries regarding the cryptocurrency project.
The United States House of Representatives Committee on Financial Services hearing had been called after months of concerns regarding how a private international digital currency backed by giant companies like Facebook could affect people’s privacy and central banks’ ability to control monetary policies.
Noyer also responded to how a central bank-run digital currency would be able to work in practice as they would require people to have accounts at the central bank rather than at commercial banks. The result of that would be that central banks would be eligible to conduct background checks to avoid things like terrorism financing and money laundering.
Not only would that put more due diligence pressure on central banks, it would also run the risk of undermining commercial bank’ traditional role as the man in the middle.
Noyer believed a fair compromise could be to allow digital currency for wholesale payments between central and commercial banks in a similar way to how most modern-day banking works.
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