The Libra project from Facebook is continuing to face serious obstacles. World governments are rightfully afraid of the cryptocurrency’s potential for disrupting global financial stability.
Bitcoin is bad enough for a lot of central banks to handle but a cryptocurrency backed by the world’s largest social media giant is a little too dangerous.
This is why 26 of the world’s central banks, including the US Federal Reserve and the Bank of England, will meet with representatives of the Libra project in Basel to start discussions on what exactly they should do with the Libra project.
The meeting will be chaired by Benoît Coeuré from the European Central Bank.
He has already sent out a warning message to Facebook informing them that if they want to operate in the EU, Libra will have to be very convincing and meet high standards for regulatory approval. This statement reflects the concerns highlighted during the recent Helsinki gathering of EU financial ministers.
During this meeting, EU members had strong concerns about how Libra and other digital currencies would disrupt existing financial systems. Libra has been drawing fire from the moment it was announced. The main critics against it the Facebook project are world governments and central banks. Bruno Le Maire, the French finance minister, has already warned Facebook that Libra might be blocked from operating in the EU if it puts the monetary sovereignty of the EU governments at risk because of its lack of regulation.
France is the current head of the G7 and it quickly assembled an investigative committee to look into Libra and other stable coins. It is not alone. The Basel-based Financial Stability Board, which makes recommendations to the G20 has also said it will start studying Facebook’s Libra plans.
Governments Want More Information
The frenzy for more information on Libra started as soon as it was announced in June 2019. Facebook has been notoriously tight-lipped about the project and governments and regulators are chasing after the company to reveal more. The European Commission’s antitrust authorities sent out a questionnaire to the company to start its investigation to see whether Libra unfairly disadvantage rivals.
Brussels is also taking steps to create a regulatory framework that will keep Libra and other stable coins on the right path. With backing from hard assets and currency baskets, stable coins are a favourite of those who like cryptocurrencies but dislike the risk. Currently, the framework is aimed to operate all across the EU.
Many European financial experts think that if Libra gets approval, it will be very popular in the EU. This is mainly because it will make cross-border payments easier.