Facebook faced the grilling of 26 central bank representatives over its Libra currency plan on Monday; Libra is a virtual currency considered a threat to monetary sovereignty.
Facebook executives representing were questioned by the Bank for International Settlements’ powerful Committee on Payments and Market Infrastructure comprising central bank chiefs from the world’s biggest economies.
The central bankers included European Central Bank (ECB) executive board member Benoit Coeure.
“The bar for regulatory approval will be high,” Coeure warned.
Regulators are aware that national governments are extremely critical of any notion of allowing a transnational currency to emerge. Both the French finance minister Bruno Le Maire and Germany’s Olaf Scholz are threatening with an outright prohibition of the use of Libra in Europe.
“… We cannot authorise the development of Libra on European soil” Le Maire said last Thursday.
Following the Eurogroup in Helsinki on Friday, Le Maire and Scholz said that the Libra project “fails to convince” that it can address monetary sovereignty concerns. It is unclear whether the Franco-German axis expresses the 19-member Eurozone consensus. .
The 28-member Libra Association is based in Switzerland, where they have applied for a “payment service license,” typically granted to banks.
The “Libra” is designed as a “stable coin” that is a value pegged to real currency. In providing credit and a virtual currency, Facebook has been making the case that Libra can democratize financial services, providing access to the unbanked. The fear is that such a parallel currency could give Facebook unmatched economic clout and political influence.
The ECB is planning to launch an alternative public digital currency that would make projects such as Libra redundant, defending monetary sovereignty. This electronic form of currency could be directly deposited to the ECB, without need for bank accounts, financial intermediaries, or clearing. This would effectively turn the ECB into a retail bank, making sure that banks were incentivized to lower the cost of international transactions.
To date, the EU does not have regulation on cryptocurrency.
Following the Eurogroup last Friday, Coeure referred to the Libra project as a “wake up call” for the ECB board. “We also need to step up our thinking on a central bank digital currency,” Coere said.