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Interview

'We cannot sacrifice safety' for Libra: ECB's Villeroy

French central banker says Facebook must play by the rules with digital currency

European Central Bank policymaker Francois Villeroy de Galhau takes a cautious view of Libra. (Source photos by Reuters)

TOKYO -- Facebook's cryptocurrency project Libra must comply with the "highest standards for banking and financial regulation," European Central Bank policymaker Francois Villeroy de Galhau stressed in a recent interview.

The governor of France's central bank made it clear that Mark Zuckerberg, founder and CEO of the social media giant, will have to convince major economies and financial institutions that the proposed digital currency is safe -- rather than a threat to stability as some have warned.

"We are open to innovation," Villeroy told the Nikkei Asian Review, acknowledging that digital currencies could "bring many opportunities to customers and the economy." However, he added, "We cannot sacrifice safety and confidence on behalf of innovation."

Libra will have to meet certain criteria, including standards against money laundering. "I think the rule of the game is now clear, supported by all major economies, and Libra's promoters are also clear about these rules of the game," Villeroy said.

He questioned the wisdom of rushing projects like Libra, arguing that "an innovation which would not be built on the highest level of confidence will not be a long-standing one."

"For currencies, whatever the technical support -- be it a bank note, a card or digital -- trust remains of the essence. We central banks guarantee this trust. This is our main responsibility."

Villeroy did recognize the positive effects Libra could have, such as improving cross-border payments, which currently are "too slow and too expensive, especially for remittances."

Zuckerberg has warned that blocking Libra would work to China's advantage. Beijing, he told Congress, is pushing the development of its own digital currency to increase the yuan's global profile and could threaten U.S. financial leadership.

Villeroy avoided commenting on Beijing's initiatives but noted that, based on discussions with his Chinese counterpart, "The People's Bank of China is also very focused on this issue of trust."

Regarding the digitalization of the euro, or a possible central bank digital currency (CBDC) -- which some European countries are already researching -- Villeroy said, "It raises many questions including the purpose."

Should it be a wholesale digital currency, a means of settling transactions for financial institutions and companies, or should it be a retail currency also accessible to households? "We have to study these questions, all the financial stability implications and then decide," he said. "Again, we are on the side of innovation but innovation preserving trust."

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