Facebook’s New Crypto Faces Scrutiny From European Authorities

ECB
18 June 2019

The unveiling of Facebook’s Libra cryptocurrency was immediately met with political opposition in Europe.

French Finance Minister Bruno Le Maire and German member of the European Parliament Markus Ferber called for regulatory scrutiny of the social network’s blockchain project, according to Bloomberg

Facebook, with more than 2 billion users, could become a “shadow bank,” Ferber warned.

“Multinational corporations such as Facebook must not be allowed to operate in a regulatory nirvana when introducing virtual currencies,” he said, sounding the alarm for regulators to take a closer look.

Le Maire echoed this sentiment during an interview with Radio 1, when calling upon the Group of Seven central bank governors to prepare a report on Facebook’s project for their July meeting.

His concern is that Libra may grow to replace traditional currencies. Similar fears have been stoked by Italian Prime Minister Matteo Salvini’s recent prevarications around the mini-BOT, a proposed national currency that some analysts predict will shake the foundations of the European Union.

“It is out of question’’ that Libra be allowed “become a sovereign currency,” Le Maire said, adding:

“It can’t and it must not happen.”

Facebook’s initiative to “build a financial ecosystem that can plug in and empower billions of people” was formally announced Tuesday after months of rumors and speculation. Libra is a stablecoin designed to tame the volatility of cryptocurrencies and thus be useful for day-to-day commerce. During its development, Facebook partnered with some of the biggest names in payments and technology, such as Visa, Uber, and Coinbase.

The currency is expected to launch in 2020 and will be pegged to a basket of established government-backed currencies and securities, designed to limit inflation and maintain liquidity, which will be controlled by the Libra Association. The Association will also purposefully burn or mint tokens in response to shifts in demand.

Calibra, a Facebook subsidiary, plans to build a digital wallet that will exist inside its Facebook Messenger and WhatsApp services to make it easy for people to send money to friends, family and businesses through the apps.

Euro photo via ShutterStock

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