EU to look into issuing public digital currency

The illustration shows toy figures on representations of the virtual currency before the EU flag and the Facebook Libra logo. Reuters text, Caption text, Caption text. Reuters
Updated 06 November 2019

EU to look into issuing public digital currency

  • Draft urges the bloc to develop a common approach to cryptocurrencies

BRUSSELS: The European Central Bank should consider issuing a public digital currency, an EU draft document said, after plans by Facebook to introduce a private one met with a hostile response from global regulators.

The social media firm said in June it planned to launch its Libra digital currency next year. But France and Germany said in September it posed risks to the financial sector, and backed developing a public alternative.

The draft EU text, seen by Reuters on Tuesday, also urges the bloc to develop a common approach to cryptocurrencies, including possibly banning projects deemed too high-risk.

In its current form, the document — which could be adopted by EU finance ministers next month — would escalate an EU regulatory campaign against cryptocurrencies, which have so far been only partly regulated in some EU states.

“The ECB and other EU central banks could usefully explore the opportunities as well as challenges of issuing central bank digital currencies including by considering concrete steps to this effect,” said the draft, prepared by the Finnish EU presidency and subject to possible amendments.

HIGHLIGHT

Digital currencies like Libra are usually backed by traditional money and other securities, while crypto coins like bitcoin are not. Both are cryptocurrencies.

Digital currencies like Libra — also known as stablecoins — are usually backed by traditional money and other securities, while crypto coins like bitcoin are not. Both are cryptocurrencies.

The draft text could be discussed by EU finance ministers on Friday, according to the agenda for that meeting, with a view to its adoption at their next gathering on Dec. 5.

ECB board member Benoit Coeure said in September the bank should “step up” its thinking on a public digital currency.

An ECB official said that, in its most ambitious version, the project could allow consumers to use electronic cash, which would be directly deposited at the ECB, without need for bank accounts, financial intermediaries or clearing counterparties.

They are all needed now to process digital payments, but might no longer be if the ECB took over their functions, slashing transaction costs. But that raises technical challenges, and opposition from banks is likely.

Until Facebook launched its project in June, regulators had largely ignored stablecoins because of their tiny size. The largest, Tether, is far smaller than bitcoin.

But Libra’s potentially huge reach — it could be used by billions of Facebook users — has spooked regulators.

As part of a global push against Libra, the G7 group of wealthy nations said last month that stablecoins should not be allowed to launch until international risks they posed were addressed.

Under regulatory pressure, Libra has lost a quarter of its original members, including payments firms Visa and Mastercard.

The EU document reiterates the G7 concerns over the risks that private currencies pose, citing money laundering, consumer protection, the functioning of payment systems, taxation and cybersecurity.

But in recommending an outright ban on risky projects and a move toward a public digital currency it goes further.

“At the very least, we need a robust regulatory framework to deal with virtual currencies,” said Markus Ferber, a German conservative who leads on financial matters the largest EU Parliament grouping.


Egypt’s sovereign wealth fund to raise authorized capital five-fold up to $62.15 billion

Updated 12 November 2019

Egypt’s sovereign wealth fund to raise authorized capital five-fold up to $62.15 billion

  • Egypt’s parliament passed a law allotting 5 billion Egyptian pounds of start-up capital for the fund last year
  • Abdel-Fattah El-Sisi: Egypt could dramatically expand the size of its new sovereign wealth fund to ‘more than several trillion pounds’

CAIRO: Egypt’s sovereign wealth fund is expected to increase its authorized capital to up to a trillion Egyptian pounds ($62.15 billion) from 200 billion pounds within three years, depending on investors’ appetite, the fund’s executive director said.
Last year, Egypt’s parliament passed a law allotting 5 billion Egyptian pounds of start-up capital for the fund, called the Egypt Fund, with 1 billion pounds to be transferred immediately from the treasury.
The law also allows the president, who picks the board of directors, to transfer the ownership of any unused state assists to the fund or to any of the fund’s assists or companies.
“We expect to increase our licensed capital within three years to a trillion pounds or less ... it all depends on the investors’ response and investment appetite,” said Ayman Soliman, the fund’s chief executive.
“The sectors we will work in include industry, traditional and renewable energy, tourism and archaeology,” Soliman said.
President Abdel-Fattah El-Sisi said last month that Egypt could dramatically expand the size of its new sovereign wealth fund to “more than several trillion pounds,” and that it “aims to contribute to sustainable economic development through management of its funds and assets.”
The fund plans to buy a stake of about 30 percent in power plants built by Siemens, Soliman said, adding that six international investors have expressed interest.
“So far, six companies submitted offers to the Electricity Holding company to buy shares in the Siemens power plant,” Soliman said.
The plants, billed at the time as the world’s biggest, were built by Siemens in a €6 billion ($6.61 billion) deal signed in 2015. El-Sisi inaugurated them last year.
In May, Electricity Minister Mohamed Shaker said that the government is considering selling the power plants to private investors, but talks were still at an early stage.