Money as we know it and use it is a bewildering phenomenon. Central bank money is not backed by gold or anything else of value. Bank money seems even less reliable. It is nothing more than a complaint against a bank. Yet the general public trusts the money traditionally generated by the financial industry.
Even more surprising is the success of privately issued digital currencies. Especially Facebook’s Libra project raises concern that not only established payment systems, but also central bank-issued fiat currencies may suffer the disturbing effects of an unprecedented success story in the works. To explain these phenomena and analyze the effects of new developments in the financial system, several clarifications are needed. The article examines the traditional concept of money, the different types of central bank and commercial money, including electronic money, and contrasts them with new and mostly unregulated types of digital currencies. Analyze the characteristics of the Libra project, the largest stablecoin project in planning, and analyze the possible implications for the operations of central banks and the banking sector. The article argues that the established financial sector should take advantage of the opportunities arising from new technologies and compete with providers of new types of payment services and issuers of digital currencies. It warns of the radical effects of central bank-issued digital currencies and sees them as a measure of last resort when e-commerce or social media giants establish digital currency schemes that compete with fiat currencies. Until this unwanted scenario occurs, central banks are expected to capitalize on their importance as a result of decades of unmatched confidence in their currencies.
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Sometimes also known as the “fintech revolution” or “fourth industrial revolution”, see Guzmán Calafell (2019), p. 1. For a summary of the different stages of evolution in the financial sector, Buckley et al. (2015), pp. 3-18.
Directive (EU) 2015/2366 on payment services in the internal market  OJ L 337/35.
PSD II, above n. 2, art. 35, 36 and recitals 49 to 52.
For the concepts behind crowdfunding, see Armor and Enriques (2018); European Commission (2016); Financial Conduct Authority (2014).
The Eurosystem, composed of the European Central Bank and the national central banks of the member states of the euro monetary union, has pursued its monetary policy objectives with unconventional monetary policy operations which have led to large expansions in the supply of currency and led to low interest rates on the credit markets. See the latest program for unconventional purchase of securities in secondary markets in the Public Sector Purchase Program (PSPP), European Central Bank Decision (EU) 2015/774 on a program for the purchase of public sector assets in secondary markets (ECB / 2015/10).  OJ L 121/20. For pre-purchase programs, see Hofmann (2017).
For more information on central banks’ price stability target, see Orphanides (2011), pp. 32–39.
These developments are most evident in the euro area, where dissatisfaction with Eurosystem monetary policy operations is growing. The Court of Justice of the European Union (ECJ) has been repeatedly invited to rule on the legality of the Eurosystem’s unconventional monetary policy programs, see judgments C-62/14 Gauweiler v. Deutscher Bundestag EU: C: 2015: 400; C-493/17 Proceedings brought by Weiss EU: C: 2018: 1000; C-370/12 Pringle v. Ireland EU: C: 2012: 756. On Gauweiler with more details on Eurosystem unconventional monetary policy operations and their legal implications Hofmann operations (2017), pp. 10-26; critically on Weiss, Hofmann (2019), pp. 545-551. Critics within the Eurosystem have raised concerns about the negative externalities of the Eurosystem’s insistence on low refinancing costs for the financial sector and the economy in general, including several governors of the euro area national central banks (NCBs) and various members of the European Central. Executive committee of the bank which evidently resigned because it was no longer willing to support the policies of the Eurosystem. On the latter, see Escritt and Canepa (2019). See also the precise and critical analysis in Jeffery (2016).