In January 2018, the French minister of economy Bruno Le Maire warned his country about the dangers and speculative risks involved in cryptocurrency. However, by year’s end he had changed his tune to support the innovation of blockchain and the potential for crypto adoption in conjunction with better regulation.
Last month the French equivalent of the Securities & Exchange Commission echoed the comments of Le Maire and warned that cryptocurrency has the potential to disrupt the finance industry on a broad scale, necessitating the need for increased regulation.
However, the tune for both cryptocurrency and blockchain development in France appears to be in line with that growing across the globe, with French minister’s urging their government to adopt a proposal that would invest €500 million into blockchain development over the next three years.
The contention between the industry of cryptocurrency and banking institutions may have been furthered by an unlikely third party, with an even more unsuspecting alternative proposed as a substitute.
According to Pauline Adam Kalfon, a financial partner at PwC France, Central Banks should leave cryptocurrencies to corporations like Facebook and JPMorgan, as opposed to issuing their own digital asset. Kalfon cautions that institutions with as much political and economic sway would be wise to wait on the sideline before tokenizing fiat currencies themselves, and allow the emerging host of players such as Facebook test the waters first.
Kalfon does not rule out the potential for future monetary tokenization by Central Banks, with governments potentially re-issuing fiat currencies in the form of digital assets and cryptocurrencies–a move that has been proposed for inflation struck countries such as Venezuela. Instead, Kalfon says to observe the hurdles of transitioning assets to a digital equivalent, allowing cryptocurrency to become “battle-tested by corporations.”
By waiting, central banks can more effectively navigate the landscape of developing into cryptocurrency, potentially learning from the mistakes that JP Morgan & Co. are likely to encounter, and overall doing their best to avoid the negative consequences that could stem from governments adopting cryptocurrency en masse.
Included in her talk, Kalfon advised the Banque de France, in particular, to avoid testing fiat-to-cryptocurrencies before the rest, outlining that country’s economic landscape is even more precarious for such a transition. She explained,
“France’s central bank may not be the best entity to drive forward such a digital currency project, which would sit within the prerogatives of the European Central Bank, Kalfon added. Having said this, Banque de France could seize technological leadership by following European Central Bank guidance.
It is clear that a European-level project would be very complex and challenging governance-wise, requiring alignment and the political consensus of all relevant stakeholders from each Member State.”
The more interesting result of Kalfon’s remarks will be if Facebook and JP Morgan, among others, succeed in a large way in implementing digital assets on their platform. In such a situation, central banks may be even more compelled to consider the potential of issuing fiat through blockchain and digital currencies.