Facebook’s Libra faces eurozone backlash

April 05, 2020 / By mobanmarket

Facebook’s Libra faces eurozone backlash

French-led coalition pushes ban or strict regulation for the cryptocurrency.

The eurozone’s five largest economies are teaming up to make it as difficult as possible for the Facebook-led virtual currency to launch next year.

France is spearheading the effort with Germany, Italy, Spain and the Netherlands, following a series of backroom meetings in October to secure a unified front against the Libra currency.

The countries’ deputy finance ministers put their position to the rest of the EU behind closed doors on Monday in Brussels, four people in the room said.

Their opposition raises the barrier to introducing Libra in Europe and may add pressure on Facebook plus the 20 other companies and organizations behind the initiative to give it up. Mastercard and Visa have already left the group.

Fears surrounding Libra — which was launched in June in partnership with the likes of ride-hailing app Uber and music streaming service Spotify — stem from the prospect of Facebook allowing its 2.4 billion users to pay with a digital currency that could supplant established currencies. That would undermine governments’ control over national finances.

The Paris-led coalition is encouraging EU governments to consider banning Libra altogether, according to eurozone diplomats and European Commission officials who spoke to POLITICO.

An outright EU ban seems problematic in the eyes of the Commission, the officials said. Brussels would need a legal reason to prohibit the payment service and still needs more information to know what rules would apply to Libra.

Instead, diplomats are preparing a statement to come from finance ministers in December that the Facebook-backed Libra Association shouldn’t be allowed to introduce the instrument unless the EU can regulate it.

When asked to comment, a spokeswoman for France’s finance minister, Bruno Le Maire, referred to his comments in Washington on October 18 when he met with his peers from the G7 economic powers.

“Countries would lose their sovereignty to private interests and lose control over their monetary policies, which is something that would be totally unacceptable,” Le Maire told reporters at the time. “We can’t accept that.”

Libra has also spooked policymakers stateside. The U.S. administration is concerned that the anonymous nature of a cryptocurrency could help terrorism financiers and money launderers move their cash out of view of authorities.

Eliminating risk

Paris, Berlin and Rome already floated the idea of banning Libra back at the G7 gathering, after the finance ministers discussed the risks associated with so-called stablecoins — cryptocurrencies like Libra, backed by conventional money to stabilize their value.

U.S. Treasury Secretary Steven Mnuchin, however, was reluctant to start issuing policy recommendations for stablecoins. He preferred to merely highlight the risks associated with initiative, officials briefed on the G7 meeting said.

Commission officials are also urging caution against the current French push, concerned it could paint the EU as a hostile place for tech companies to launch new products and services.

France’s allies are less patient.

“We defend that it is necessary to analyze and eliminate all possible associated risks, as well as to create an appropriate regulatory and supervisory framework before allowing any such project to be launched,” a Spanish finance ministry official said.

A joint declaration on Libra “with other eurozone member states” is in the works, the Spanish official continued. EU finance ministers are scheduled to briefly discuss plans for the December statement at their next Ecofin Council on November 8.

A German government official, asked for comment, pointed to Fi­nance Min­is­ter Olaf Scholz’s comments to WirtschaftsWoche magazine this month. He said he took a “very, very critical” view of Libra, and opposed private currencies competing with official money.

A representative for Libra said the association’s “priority is to partner with regulators to ensure all their questions and concerns are rightfully addressed.”

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The Geneva-based Libra Association, which is in charge of preparing the currency launch, recently replied to 32 questions from the Commission’s financial services department.

Commission teams studying the answers have learned little new from the responses, according to officials who said it’s still not clear how Libra will operate as a business.

“Our short-term priority is to continue our legal assessment of the cryptocurrency,” a Commission spokesperson said. “At this stage, it is too early to say how the project can be launched in the EU.”

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