Denis Beau, deputy governor of Banque De France, the nation’s central bank, says that lawmakers should develop a comprehensive global regulatory framework for digital assets.
Beau, whose comments came during a speech at an Official Monetary and Financial Institutions Forum (OMFIF) conference in London on October 15, noted:
“There is indeed a need for overall consistency to prevent regulatory arbitrage under the ‘same activities, same risks, same rules’ principle.”
He added that the only way to ensure that is with standardized regulatory guidelines for crypto assets.
Beau’s comments have come following several warnings issued by authorities regarding the Facebook-led stablecoin project Libra, which has seen several major corporations withdraw from its Association due to regulatory pressure.
While comparing Libra to central bank-issued digital currencies (CBDC), Beau noted that the social media giant’s cryptocurrency “may achieve significant market power, thus posing risks to security and financial stability.”
Although he did not provide any specific comments regarding Libra’s challenge, he did emphasize the need for standardized global regulations and wants to encourage central banks to experiment with their own CBDCs.
He pointed out that the existing global financial system depends on costly and cumbersome funds transfer platforms. He believes that distributed ledger technology (DLT) could help resolve many of the problems faced by the current financial ecosystem.
However, he said that crypto tokens will not be able to serve as an effective replacement for the global financial system. Cryptocurrencies are highly volatile and it costs too much to effectively transfer money, Beau said. He also noted that cryptos are not backed by governments, which is necessary in order to become a trusted store of value.
Beau stated:
“[Cryptocurrencies] can also bring material risks to our payment systems which, if unaddressed, might introduce new sources of fragmentation, instability and fraud.”
He went on to add:
“The potential role of a wholesale CBDC is, in my view, worth considering, if not desirable.”