June 21, 2019 / 8:33 AM / 3 months ago

Bundesbank's Weidmann says 'virtual' coins could undermine banks if used widely

FILE PHOTO - German Bundesbank President Jens Weidmann speaks at a news conference during the G20 Finance Ministers and Central Bank Governors Meeting in Fukuoka, Japan June 9, 2019. REUTERS/Kim Kyung-Hoon/Pool

FRANKFURT (Reuters) - Virtual tokens pegged to official currencies, known as stablecoins, could undermine banks if they became widely used, the head of Germany’s central bank said on Friday.

Under such circumstances “they would almost certainly become systemic by nature, not only because of their operational risks, but also in a more fundamental way: they could undermine the deposit-taking of banks and their business models,” Jens Weidmann told a conference at the Bundesbank.

“This might disrupt transaction banking and financial market intermediation,” Weidmann, who also sits on the European Central Bank’s Governing Council, said.

U.S. social network Facebook this week announced plans to establish its own payment system, backed up by a stablecoin it calls Libra.

Reporting by Francesco Canepa; editing by John Stonestreet

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