HomeCryptoEurochain vs Libra: the ECB challenges Facebook

Eurochain vs Libra: the ECB challenges Facebook

The European Central Bank responds to the challenge posed by Libra, the Facebook stablecoin, by launching a similar project, Eurochain. At the moment the project is researching DLT-based solutions applied in the field of payment infrastructures, which would rely on existing services already provided by central banks. Eurochain was actually launched in April 2018, when a research group started to study the use of DLT and payment prototypes. 

The stated aim of the ECB is to create a simple, centralised payment system for central bank digital currencies (CBDC). 

It would safeguard the privacy of users, in particular for low-value transactions, while ensuring the necessary anti-money laundering controls in cases of large money transfers.

Essentially, it could be everything that Libra currently does not seem to offer. Facebook’s stablecoin has been the subject of debate precisely because of its privacy issues

This is no small feat, considering that Facebook has 2 billion users worldwide and has already gone through a scandal for the improper use of data as evidenced by the Cambridge Analytica case. 

Moreover, the digital currency of the ECB described in the Eurochain project would guarantee a currency under the full control of the banks, which would address the other big problem of Facebook: having Libra in the hands of a private company. 

In its whitepaper, the ECB states that “The prospect of central bank initiatives, however, should neither discourage nor crowd out private market-led solutions for fast and efficient retail payments in the euro area.”.

In short, the Eurochain project is ambiguous in its approach to private initiatives, of which it will be a direct competitor. 

However, the whitepaper explains that at the moment there is no immediate need to move forward to create a CBDC (central bank digital currency) in the euro area. Nonetheless, the research goes on, so that if and when it is implemented, the digital currency will be based on an infrastructure that will use Proof of Concept, developed in collaboration with R3 and Accenture, with the features of the Corda platform.  

Eurochain, use cases and analogies with Libra

The digital currency issued by the ECB is described as follows:

  • It will have the same characteristics as cash money;
  • It will operate through intermediaries, directly linked to the central bank;
  • It will be collateralised with dedicated reserves held by the Central Bank;
  • It will be totally entrusted to the Central Bank, which will be able to put it in and remove it from circulation;
  • It will have a dedicated anti-money laundering authority.

Ultimately, it will be a totally centralised currency. As would Facebook’s Libra. Two similar projects, which utilise the blockchain, but in the most antithetical way compared to the more “ethical” use of the blockchain, which instead was created to encourage disintermediation. 

It is precisely this aspect that arouses the greatest criticism that is currently circulating on social networks. According to the detractors, just like Libra, the European digital currency would only control the users’ transactions and eventually censor them through a dedicated entity. 

The biggest difference is between a public operator, the European Central Bank, and a private operator, Facebook, which although subject to regulation, pursues business purposes, not the collective interest. 

For the ECB, however, the path is essentially compulsory. While the Libra project is moving forward, possibly delayed, yet not cancelled, other entities are in the process of releasing their digital currency, starting with China, which is already initiating the testing phase for a currency that could potentially be used by a billion people

 

Eleonora Spagnolo
Eleonora Spagnolo
Journalist passionate about the web and the digital world. She graduated with honours in Multimedia Publishing at the University La Sapienza in Rome and completed a master's degree in Web and Social Media Marketing.
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