Facebook's plan to roll out Libra around the world has triggered the euro zone to consider launching its own public cryptocurrency that could challenge it.
September 13, 2019, | AtoZ Markets - With aspirations to replicate and make projects like Facebook’s Libra redundant, euro zone central banks and governments are working on a long-term plan to launch a public cryptocurrency.
The 19-country bloc is unitedly going after a tough approach from a regulatory standpoint in case Libra should ask for authorizations to launch on the continent, notes Reuters.
Euro Zone public cryptocurrency spooked by Libra
Work on the European Central Bank (ECB) project began prior to Libra’s rollout and could last months or years. The project has faced some bank opposition, and the technical feasibility is not yet known.
Aside from these proposals, ECB board member Benoit Coeure has reportedly said that Libra was “a wake-up call.” He further added, “we also need to step up our thinking on a central bank digital currency.”
An ECB official said the project could enable consumers to tap into electronic cash that would be deposited directly at the ECB without the need for financial intermediaries, bank accounts or clearing counterparties.
Those players – which are now necessary to process digital payments – may not be needed any longer if the ECB assumes those functions. It was also noted that Libra’s plan would not have financial intermediaries.
FaceBook Libra isn't welcomed in Europe
Facebook unveiled its plans back in June to launch its own digital currency, Libra, for payments among its hundreds of millions of users in Europe and around the globe.
However, authorities in the EU as per the report are sending a message to Facebook that its digital coin isn’t welcomed in the continent. Coeure said, per the report, “certainly the bar set for regulatory approval will be very high.”
France’s Finance Minister Bruno Le Maire also told reporters in Helsinki that Libra could cause risks to consumers, financial stability and even “the sovereignty of European states”, and repeated his pleas to block Libra in Europe.
In addition, the ECB is being advised by Board Member Yves Mersch that Facebook’s Libra could impact its ability to make monetary policy.
“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,” Mersch said, per reports.
It remains unclear whether Malta and other smaller EU states would agree with Le Maire’s stricter approach on FaceBook Libra.
At the moment, Malta - in the 19-country bloc - has established itself as a prime fintech hub, hosting the largest online gambling industry. The Maltese government has devised its own framework to attract more crypto exchanges.
In Switzerland, Libra is applying for a payment service licence, although it could face rules that usually apply to banks.
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