Former senior adviser to the IMF on policy issues Barry Eichengreen (Barry Eichengreen) believes that the white paper of the Libra project spelled out insufficient anti-crisis measures.
In a report that eichengrin compiled with academician Ganesh Viswanath-Natraj, He stressed that the protective measures assumed by Libra in a crisis are similar to the settlement certificates that were in circulation in the United States before the creation of the Federal reserve in 1913.
The project’s white paper suggests that network operators will issue certain “buyout conditions” in order to prevent the withdrawal of real funds from the Libra reserve. It is also possible to impose penalties for companies that still want to withdraw some of the money from the reserve basket.
“These measures closely resemble settlement certificates issued by banking groups in the United States in the 19th century in response to Bank failures and financial crises,” the economists said.
Settlement certificates were used by US banks as a quasi-currency when confidence in a Bank’s dollars fell below a certain level. Before the creation of the Federal reserve in the United States, dollars were issued by private banks and there were situations when the dollar of one Bank was preferable to the dollar of another.
Economists believe that the anti-crisis measures prescribed in the Libra White Paper can only be temporary, until relations with the Federal Reserve become more defined. Moreover, the document mentions a “third-party administrator” who can provide additional liquidity during a crisis.
However, As Eichengreen and Viswanath-Natraj stressed, the main issue for Libra remains the influence of stabloin on the monetary policies of Central banks:
“If residents of any country start using LibraUSD exclusively, the Central Bank of this country will lose the ability to influence the situation. It will lose control of monetary conditions. It will not be able to support local financial markets.”
Recall that the updated Libra White paper was presented in mid-April. The developers decided to abandon the stablecoin, which is provided by a basket of real currencies, and instead plan to launch several stable cryptocurrencies, backed by Fiat currencies in a ratio of 1:1.