(CNBC) Facebook and J.P. Morgan met with skeptical global central bank officials to discuss the emergence of new cryptocurrencies designed to maintain a stable value.
The consortium overseeing Facebook’s libra cryptocurrency as well as representatives from J.P. Morgan laid out their plans for so-called stablecoins at a conference in Basel, Switzerland, the Bank for International Settlements said in a statement. The BIS is an umbrella group for the world’s largest central banks.
The meeting was called by a working group set up by the Group of Seven countries to scrutinize stablecoins like Facebook’s. Benoit Coeure, a member of the European Central Bank’s executive board, chaired the event.
“As a new technology, stablecoins are largely untested, especially on the scale required to run a global payment system,” Coeure said. “They give rise to a number of serious risks related to public policy priorities. The bar for regulatory approval will be high.”
The Financial Times reported on Sunday that Facebook representatives were set to meet with officials from 26 central banks including the U.S. Federal Reserve and Bank of England. Neither the BIS nor the ECB confirmed which central banks were present at the meeting.
What is libra?
First announced in June, Facebook’s libra coin is aimed at making it easier to transfer money around the world, without having to go through financial intermediaries like banks. But the social media giant has faced a tough response from global regulators and lawmakers.
The digital currency is being developed by Facebook and a Switzerland-based consortium known as the Libra Association, which includes such companies as Visa, Uber and Coinbase. It would be backed by a digital ledger different to bitcoin’s and, also unlike bitcoin, asset-backed in order to maintain a stable value.
Following the meeting with policymakers, David Marcus, the executive leading Facebook’s cryptocurrency initiative, defended the project, saying libra wouldn’t “threaten the sovereignty of Nations when it comes to money.”
“We will continue to engage with Central Banks, Regulators, and lawmakers to ensure we address their concerns through Libra’s design and operations,” Marcus said in a tweet.
Industry executives say the regulatory scrutiny around libra is a good thing, as it forces policymakers to take a serious look at an asset class that has previously been shunned by governments and financial institutions alike.
It appears to have given some central banks an incentive to look further into the creation of their own digital currencies. The People’s Bank of China recently said it was close to releasing its own virtual coin, while Bank of England Governor Mark Carney has raised the idea of creating a reserve digital currency.
Coeure recently said the ECB needs to “step up” its thinking around the creation of a government-backed digital currency.
J.P. Morgan has also developed its own cryptocurrency to settle transactions between clients in its massive wholesale payments business. The digital token, called “JPM Coin,” is redeemable for a single U.S. dollar, meaning its value shouldn’t fluctuate in value much like many other stablecoins.
