It is important for central banks to get involved in handling cryptoassets and other new virtual payment systems, Bank of Latvia Governor Martins Kazaks said in an interview.
„Technological development is very fast and people and entrepreneurs are eager to use these technologies. In my opinion, it is just impossible for central banks not to take part in this. There are several reasons for this. Firstly, if they find it convenient, people will use these services. But this can entail a number of risks from the perspective of the central bank or the state,” Kazaks said.
„If central banks give up control over the circulation of money to Facebook or some other issuer of cryptoassets, they are left unable to help the economy in the times of crisis. Is it good? I think not, because this will also bring about social problems. If these functions are delegated to someone else, we do not know what their interests are. Will they help the economy or not? Will they lend their support or not?” Kazaks said.
The Bank of Latvia governor also indicated that if the payment systems are handed over to some third-party, it is no longer possible to ensure the prevention of money laundering and other financial crimes.
Kazaks said that although the European Central Bank has not yet taken any decisions about the matter, he personally believes that the emergence of a digital euro is only a matter of time.
At the same time, one should not expect cash to disappear in a foreseeable future despite growing the popularity of non-cash transactions.
„Though Libra has met with fierce resistance from central banks and supervisory authorities and might never see the light of day, in many other cases tech firms (both start-ups and established big players) have successfully captured bits and pieces of universal banks’ traditional value chain. This trend may only intensify in the coming years. In this environment, European banks remain squeezed.”