The widespread acceptance of Facebook’s Libra cryptocurrency would pose a threat to monetary policy in the EU, according to one board member of the European Central Bank (ECB), Yves Mersch.
He said on Monday that “Depending on Libra’s level of acceptance and on the referencing of the euro in its reserve basket, it could reduce the ECB’s control over the euro [and] impair the monetary policy transmission mechanism by affecting the liquidity position of euro area banks…”
Mersch also said that Libra could “undermine the single currency’s international role, for instance by reducing demand for it.”
According to the ECB representative, the centralized nature of Libra is also of “extreme” concern. He stressed that the coin would be accountable to shareholders, raising trust issues, and would not be backed by a central bank.
Libra is being launched by the same company that “had to explain themselves in front of legislators in the United States and the European Union on the threats to our democracies resulting from their handling of personal data on their social media platform,” Mersch recalled.
He urged EU regulators to bring Libra under their remit, at the same time calling on Europeans not abandon the “safety and soundness of established payment solutions and channels in favor of the beguiling but treacherous promises of Facebook’s siren call.”
Facebook’s intention to launch its own cryptocurrency have been met with concern and skepticism in many countries, including China and India, as well as in crypto circles.
Like regular currencies, Libra would be highly centralized, an “extremely concerning” setup since it is not backed by a lender of last resort and it is ultimately accountable to shareholders, who are not seen as repositories of public trust, Mersch added.
“It is scheduled for release in the first half of 2020 by the very same people who had to explain themselves in front of legislators in the United States and the European Union on the threats to our democracies resulting from their handling of personal data on their social media platform,” Mersch added.
Given these challenges, European regulatory and supervisory authorities need to assert jurisdiction over Libra and also need global cooperation to mitigate its risks.
“I sincerely hope that the people of Europe will not be tempted to leave behind the safety and soundness of established payment solutions and channels in favor of the beguiling but treacherous promises of Facebook’s siren call,” Mersch added.
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