EU Regulators Mull Implications of Facebook Cryptocurrency

Cryptos' cross-border nature calls for regulatory coordinatio, but in fact there is little consensus over how to do this.

A few hours after Facebook dropped the secrecy surrounding its in-the-works cryptocurrency, or Libra, European central bankers say they have a broader set of concerns.

Although Facebook has signed up financial giants including Visa, Mastercard, and PayPal to back the new cryptocurrency that it plans to unveil in 2020, an instant skeptical view expressed today by top policymakers, signaling that not all European supervisors are convinced the new coin is a good idea.

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One such blow to Libra came from French Finance Minister Bruno Le Maire who said in a radio interview that Facebook’s stablecoin shouldn’t be seen as a replacement for fiat currencies. One chief concern for Le Maire was whether Facebook’s coin could stick to strict money-laundering and anti-terrorism finance rules.

He also spoke about serious implications for financial stability if authorities lose control over the phenomenon and called G7 central banks to prepare a report on Facebook’s project for their July meeting.

Bank of England governor Mark Carney, who was speaking at a conference organized by the European Central Bank in Portugal, said he is keeping an ‘open mind’ on Libra, but warned it might face strict regulation if it takes off.

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“Anything that works in this world will become instantly systemic and will have to be subject to the highest standards of regulation,” he added.

A deluge of views, but no act

The less-severe comments from BoE chief came in line with his previous attitude, which was intrigued by the crypto possibilities, dismissing concerns that they currently pose a risk to financial stability.

Mark Carney reportedly discussed the project with Facebook founder Mark Zuckerberg earlier this year as part of a broader meeting on the future of finance.

Unsurprisingly, German member of the European Parliament Markus Ferber was also sitting at the hawkish end of the spectrum towards crypto assets. He warned that Facebook’s Libra ultimately could yield only a “shadow bank.”

Overall, while the world’s largest social media platform is laying the groundwork for its ambitious push into payments, European regulators are seemingly skeptical as to its crypto offering, which also involves a wallet called Calibra, would fall under its scope.

The BoE governor said “we will look at it very closely and in a coordinated fashion,” but since cryptocurrencies have gone mainstream, there has been a similar deluge of speeches over its roles and the regulatory issues they raise.

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