On Monday ECB executive board member Yves Mersch stated that Facebook’s Libra poses a threat to the EU monetary policy. He said that it could undermine the euro’s international roles as well as reduce the ECB’s control over the euro. He stated that Europe should, therefore, ignore the treacherous promises of Libra.
Libra could affect EU monetary policy
Mersch said that depending on the level of acceptance of the cryptocurrency and the referencing of the euro in its reserve basket it could potentially reduce the control of ECB over the euro. It could also impair the monetary policy transmission mechanism by impacting on the liquidity if Eurozone banks. He further argues that the cryptocurrency will undermine the role of the euro as a single international currency by reducing its demand.
The ECB representative states that Libra just like all cryptocurrencies will be highly centralized which is an extreme concern. This is because it does not have backing by a lender of last resort and it’s accountable to shareholders. This raises trust issues as it will not receive central bank backing.
Strict regulation for Libra
Facebook a company that has had issues on handling personal data is launching the cryptocurrency which further raises concerns. Marsch said that it will be hard to trust a company that has faced various data privacy scandals. Because of these concerns, EU regulatory authorities should, therefore, assert jurisdiction over the cryptocurrency and also seek global cooperation to do away with risks.
He equally called on EU members not to abandon the security and reliability that established payment channels and solutions offer in favor of the treacherous promises of Facebook’s Libra.
The company expects to launch the cryptocurrency early next year. However, the cryptocurrency has met criticism and skepticism from various countries such as India and China as well as in the crypto community. Facebook is planning to elevate the downtrodden out of poverty through Calibra which will serve as a gatekeeper for Libra. The Calibra crypto wallet will be available in Whatsapp, Messenger as well as on a standalone app to launch next year.