The European Central Bank (ECB) has once again warned that Facebook’s Libra could pose a threat to its ability to set monetary policy, Reuters reported on 2 September.
During a speech at the ECB’s legal conference in Frankfurt, a member of the Executive Board of the bank, Yves Mersch, said that Facebook’s Libra is “beguiling but treacherous”, and that private currencies have little chance of becoming an alternative to centrally-issued currency. He also stated that the new stablecoin could affect the banks’ ability to set monetary policies, and that it could pose a threat to the Euro’s role in the EU, saying that:
“Depending on Libra’s level of acceptance and on the referencing of the euro in its reserve basket, it could reduce the ECB’s control over the euro, impair the monetary policy transmission mechanism by affecting the liquidity position of euro area banks, and undermine the single currency’s international role.”
Another concern that Mersch has with the Libra stablecoin, which will be backed by a number of fiat currencies and government bonds, is its centralized nature. Even though regular currencies are also highly centralized, they are backed by a “lender of last resort, while Libra is not, and not to mention that it will be accountable to shareholders, which according to Mersch are not seen as “repositories of public trust”. He went on to say that:
“It is scheduled for release in the first half of 2020 by the very same people who had to explain themselves in front of legislators in the United States and the European Union on the threats to our democracies resulting from their handling of personal data on their social media platform.”
As we all know, Facebook’s Libra has raised concerns with regulators around the world ever since its announcement in June, mainly because of its potential money laundering and capital control implications. Even though U.S. lawmakers visited Switzerland’s financial regulators last month to discuss the stablecoin, they still remain concerned with the project.