France vows to block Facebook's Libra cryptocurrency in Europe
The EU has a long-term plan to build its own public digital currencyBy Adrian Potoroaca
Cutting corners: France has vowed to prevent Facebook's Libra from operating in the EU, dealing another blow to the company's ambitious plan for a global digital currency. The concerns are centered on both consumer risk and the potential erosion of the governments' monetary sovereignty, which has prompted a new initiative for the creation of a European cryptocurrency.
During an OECD conference on cryptocurrencies in Paris, French economy and finance minister Bruno Le Maire sounded the alarm on Facebook's digital coin and pushed for an EU ban. He believes Libra shouldn't be allowed to operate in Europe as it poses a big threat to monetary sovereignty and comes from a company who has demonstrated that it doesn't deserve the public's trust.
The French minister's remarks stem from Facebook's reputation of abusing its dominant position in social media as well as the privacy breaches that have affected millions of users. Interestingly enough, the Libra Association says it welcomes the scrutiny and is prepared to work with European authorities to iron out all the issues found in Libra.
That being said, it faces similar barriers on the other side of the Atlantic, where US authorities in July have asked Facebook to pause its cryptocurrency plans until they can assess its implications. The company and the Libra Association insist that the digital currency will be regulated like other payment service providers, but lawmakers are concerned about security as well as potential risks to global financial stability.
It's worth noting that while the idea of a global digital currency can lead to a better financial inclusion of those who may not afford to work with banks, there's no telling what impact even a small disruption in the service may have on all the people that would come to depend on it.
Then comes the question if Facebook has good mechanisms in place to prevent fraud, theft, and money laundering. According to CipherTrace, $4.3 billion were lost at cryptocurrency exchanges in 2019 alone. A leaked UN report says countries like North Korea have managed to steal in excess of $2 billion in digital currencies to fund their military ambitions.
All these concerns have prompted a new initiative for the Euro zone governments and central banks, who are now working on launching a digital currency that would render Libra irrelevant. Reuters says the block is also drafting a set of strict rules for cryptocurrencies, which is going to make Facebook's life even harder in the region.
During a news conference in Helsinki, European Central Bank board member Benoit Coeure noted that Libra was a "wake-up call." The ECB didn't offer a lot of details about the "EuroCoin," but it did say that it would bypass the need for bank accounts and other financial intermediaries, reducing the costs associated with the processing of digital payments.
In the meantime, some of the early backers of Facebook's Libra have lost their enthusiasm and are reportedly looking at options to distance themselves from the project. It also doesn't help that US officials view the members as a sort of "crypto mafia" that only works towards strengthening their businesses. Libra hasn't even launched yet, and it looks like Facebook will face an uphill battle that is only going to become harder with all the antitrust scrutiny around its business.
Image credit: Facebook Libra and 50 dollar banknotes by Ascannio