Lawmakers in many countries are concerned that Libra will affect their local currencies. Facebook plans to issue Libra cryptocurrency in 2020.
Lawmakers around the world put pressure on Libra, the cryptocurrency introduced by Facebook, on concern that the currency could disrupt the global financial system.
On September 17, the European Central Bank (ECB) executive board member Benoit Coeure warned that cryptocurrencies like Libra “could challenge the hegemony of the dollar.” This comment of Coeure also reflects the concern of President Donald Trump, once commented that Libra “has no influence and reliability” and “the true currency” in the US is the USD.
This seems to be a familiar topic for some regulators and legislators, who worry that Libra will compete with government currencies. The reason is that Facebook is so influential with more than 2.4 billion monthly active users, as of July. And companies in the Libra Association, a Swiss-based organization partnering with Facebook, include including big players like Uber, Visa, Vodafone.
Last week, finance ministers of France and Germany protested against Libra, saying the Facebook currency “failed” to address the risks surrounding financial security, investor protection and the law. anti money laundering. French Finance Minister Bruno Le Maire even said he “could not allow Libra’s development on European soil”.
The main concern for both countries is whether Facebook, a private company, can really compete with national currencies like EUR and USD. Experts say Facebook may also reduce the role of regulators.
Then last year’s Facebook scandal revolved around data privacy. Global privacy watchdogs from the UK, US and EU have expressed concern about Facebook’s too little mention of Libra users’ information security plans.
What does Facebook say?
Facebook’s argument is that they will not make a profit on the new cryptocurrency. Instead, Libra is tied to a currency basket like the USD to maintain a stable value. The main purpose of the new currency is to allow people to transfer money globally easily.
David Marcus, the chief executive of the project, said Libra “would not be a threat to the national currencies”.
In terms of privacy, Dante Disparte of the Libra Association said the organization is committed to protecting user data.
While Facebook is under pressure from lawmakers, Teunis Brosens of Dutch bank ING said the company was right to announce the Libra plan early. He said Facebook also opposes the views of people who “absoluteize” Bitcoin, relying on the world’s most famous cryptocurrency rather than traditional financial services.
Indeed, Facebook has been talking to global regulators in an effort to allay their fears about the Libra before its planned 2020 launch. On September 16, the company met with central bank officials in Basel, Switzerland. Earlier, Facebook’s Marcus appeared before Congress to answer questions from lawmakers about Libra.
According to industry experts, despite the backlash with Libra, this shows that regulatory agencies around the world are being forced to seriously consider the issue of cryptocurrencies – though some point out the differences. between Libra and cryptocurrencies like Bitcoin.
For example, the central bank’s idea of cryptocurrencies seems to have been reconsidered by some institutions. This idea has been around for some time, and Sweden’s Riksbank is looking to test the development of the bank’s electronic version of the coin this year.
But more recently, Bank of England Governor Mark Carney proposed an electronic reserve currency, while ECB Coeure suggested that central banks should collaborate to research the supported cryptocurrency. by the government.
What is Libra?
First announced by Facebook in June, Libra is a cryptocurrency that is guaranteed to allow people to send money globally as easily as sending a photo or text.
Libra will be backed by a reserve currency basket. This is the difference between this currency and other cryptocurrencies like Bitcoin and Ether, which are known for their high price fluctuations.
Facebook has set up a new subsidiary called Calibra, which creates an e-wallet for users to store and exchange Libra coins, helping the company make a profit from virtual currencies. Marcus is the head of this unit.
And despite great pressure on the law, other countries may not be afraid of this project. ING’s Brosens said that central banks in emerging markets may be more open to a proposal like Libra, as their economy is heavily dependent on the US dollar.
“Their borrowing depends on the dollar. Monetary policy is also bound by the dollar and international capital flows ”.