Most European Regulators Have Scrutinized Facebook's Libra, Except One: Who’s the Odd One Out?
Made up of more than two dozen companies and based in Geneva, a few of the founding members, including PayPal, Mastercard, Visa, Stripe, Booking Holdings, and eBay, decided to leave the Libra project. A five-member board governance board was formed after the Libra Association reaffirmed its commitment by holding its inaugural meeting in Geneva, Switzerland, on Oct. 14.
What happened recently with the Libra Association?
Made up of more than two dozen companies and based in Geneva, a few of the founding members, including PayPal, Mastercard, Visa, Stripe, Booking Holdings, and eBay, decided to leave the Libra project. A five-member board governance board was formed after the Libra Association reaffirmed its commitment by holding its inaugural meeting in Geneva, Switzerland, on Oct. 14.
However, the Libra Association quickly defended, saying, “we’re better off knowing about this lack of commitment now, rather than later.”
Libra announced that the launch was planned for June 2020; however, the global watchdogs stated, “we are surprised and concerned that this further detail is not yet available.” On Sept. 16, Libra representatives met with the Committee on Payments and Market Infrastructure (CPMI), a part of the Bank for International Settlements (BIS) – a group for 60 central banks and monetary authorities across the globe to discuss the regulatory hurdles around stablecoins developed by large corporations.
Despite the global uncertainty of the stablecoin, the Libra Association will continue with its plan to launch with the 100 members initially envisaged when it was announced in June. The association also believes that new financial and banking partners will be joining.
The European Union
Benoit Coeure, an executive at the European Central Bank, warned that regulators are cautious of cryptocurrencies by large corporations similar to Libra. He mentioned, “as a new technology, stablecoins are largely untested, especially on the scale required to run a global payment system. They give rise to a number of serious risks related to public policy priorities.” He believes that Libra needs to be well understood and thoroughly tested in a real-world environment to see whether it is scalable to run a global system for its official launch.
The executive branch of the European Union sent a questionnaire to Facebook and the Libra Association regarding clarification about the stablecoin. These questions come after the European Union antitrust regulators’ preliminary investigation into Facebook’s plans. The EU regulators were concerned about the use of information and data, along with the integration of Libra wallets with WhatsApp and messenger services.
However, Dante Disparte, Head of Policy and Communications for the Libra Association, stated, “the Libra Association welcomes this public policy dialogue and multi-stakeholder process that will help unleash the economic and social potential of digital currencies.”
Valdis Dombrovskis, the European Union’s finance commissioner, pledged to propose new rules to regulate cryptocurrencies similar to Libra. Dombrovskis’ served as Latvia’s prime minister and finance minister and was a member of the European Parliament from 2004 to 2009. If reappointed as the Executive Vice President of the European Commission, Dombrovskis would be handling “An Economy that Works for People” and will be working to “deepen Europe’s economic and monetary union.” Dombrovskis advocated for the EU’s need to address “unfair competition, cybersecurity, and threats to financial stability.”
The European Commission
Margrethe Vestager, the Executive Vice President-Designate of the European Commission, questioned the motives behind Facebook’s Libra stablecoin. Vestager addressed competition as a possible impact from Libra’s launch due to Facebook’s multimillion user base and a distortion of competition in the payment services market.
Vestager added:
"It's a pretty new thing that we are starting to question something that does not exist yet. But it is so far in the future that we cannot tell if this is going to be a problem. And the problem may be that you get a completely closed ecosystem that has nothing to do with the rest of the economy."
“I want to be absolutely clear: In these conditions, we cannot authorize the development of Libra on the European soil." He added, “the monetary sovereignty of countries is at stake from a possible privatization of money... by a sole actor with more than 2 billion users on the planet.”
“A payment system like that would be good for Europe as a financial center and its integration into the world financial system.”
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