Facebook Libra Meets Roadblock in Germany and France

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Facebook Libra Meets Roadblock in Germany and France

The soon to be launched Libra, a coin for trading sponsored by Facebook, has met a daunting obstacle in Germany. Despite the advancements that will be possible with the success of this block chain technology, authorities are unsettled.

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Earlier this week, the cryptocurrency project has been taking blows as it is set to go live in 2020. The French Finance Minister, Bruno Le Maire, had fingered it as a threat to other currencies. One report claims that the Minister had said it was going to cause financial instability for other Sovereignties.

All this came after representatives of Libra cryptocurrency had set up a meeting with officials from about 26 central banks. This included the US Federal Reserve and the Bank of England. The meeting was scheduled for the representatives from the Facebook umbrella project to answer questions.

It would seem that the answers provided were not satisfactory enough to allay the fears. Many of the officials fear that Facebook Libra might cause wreck the policies monitoring money around the world. The representatives had tried to assure them that the cryptocurrency was not coming to fight the US dollar or Euro.

The fears are majorly about the risk that the coin would pose to European Union state’s Sovereignty. What the German wing argued is that the cryptocurrency should not be used to develop private forms of money.

While the potential of the technology is admitted, Olaf Scholz, the German Finance Minister is quoted to have said that they would not allow private companies to issue new currency. This is because it is one of the most important element of a state sovereignty. It is likely seen as too much power in the hands of a private individual as opposed to a state.

We also found reports that an international central bank digital currency was proposed. To help the global reserve currency status of state’s currencies if the private cryptocurrencies begin to challenge them.

France, Germany blast Facebook’s Libra, back public cryptocurrency

HELSINKI (Reuters) – France and Germany said on Friday that Facebook Inc’s ( FB.O ) Libra currency posed risks to the financial sector that could block its authorization in Europe, and backed the development of an alternative public cryptocurrency.

The criticism came as the European Central Bank said it was working on a long-term plan to launch a public digital currency that could make projects such as Libra redundant.

Virtual currencies pose risks to consumers, financial stability and even “the monetary sovereignty” of European states, France’s finance minister, Bruno Le Maire, and his German counterpart, Olaf Scholz, said in a joint statement issued at a meeting of euro zone finance ministers in Helsinki.

“France and Germany consider that the Libra project, as set out in Facebook’s blueprint, fails to convince that those risks will be properly addressed,” they said.

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The 19-country euro zone bloc is united in pursuing a tough regulatory approach should Libra seek authorizations to operate in Europe, officials said at the meeting.

It is also considering a common set of rules for virtual currencies, which are currently largely unregulated.

The currency union has worked in past years on several plans to make digital payments cheaper and faster, but none of them has properly taken off so far.

The Libra Association, a 28-member organization Facebook is setting up in Switzerland to manage the currency, said it welcomed the feedback.

Members “are committed to working with regulatory authorities to achieve a safe, transparent and consumer-focused implementation of the Libra project,” Dante Disparte, the group’s head of policy and communications, said in a statement.

Plans unveiled in June by U.S. social media giant Facebook to launch its own digital currency, Libra, for payments among its hundreds of millions of users in Europe and around the world have triggered a rethink.

Libra was “a wake-up call”, European Central Bank (ECB) board member Benoit Coeure told a news conference in Helsinki after a meeting of euro zone finance ministers.

He said Libra had revived efforts to widen the uptake of an ECB-backed project for real-time payments in the euro zone, known as TIPS. The project, launched last year, has been met with caution by banks.

“We also need to step up our thinking on a central bank digital currency,” he added, unveiling a so far little-known plan.

An ECB official said the project could allow consumers to use electronic cash, which would be directly deposited at the ECB, without need for bank accounts, financial intermediaries or clearing counterparties.

These actors are all needed now to process digital payments, but may no longer be necessary if the ECB took over their functions, slashing transaction costs. Libra’s plan also would do without financial intermediaries.

Work on the ECB project started before the launch of Libra and could last months or even years, Coeure said. The technical feasibility remains to be seen and opposition from banks is likely. He will present a report on virtual currencies to G7 finance ministers next month, officials said.

Le Maire said one of the purposes of this initiative was to make sure that banks reduce fees on international payments.

“We encourage European central banks to accelerate work on issues around possible public digital currency solutions,” Le Maire said in the joint statement with Germany’s Scholz.

While euro zone ministers seem united on a tough regulatory line on Libra, it is less clear whether they agree to set up common rules for virtual currencies.

The EU’s financial services commissioner, Latvia’s Valdis Dombrovskis, is always careful to underline that cryptoassets are an opportunity as much as a threat.

The EU does not have specific regulations on cryptocurrencies, which until Libra was unveiled had been considered a marginal issue by most decision-makers because only a tiny fraction of bitcoins or other digital coins are converted into euros.

New EU-wide rules came into force last year to increase checks on virtual currencies’ trading venues with the purpose of reducing risks of money laundering and other financial crime.

But apart from that, virtual currencies move in what is largely a legal limbo in the EU, as regulators have not yet managed to agree on whether to treat them as securities, payment services or currencies in themselves – the latter option being ruled out by most.

In the absence of specific regulations, EU officials are assessing whether existing rules governing financial instruments could apply, but have so far reached no conclusion.

When asked whether Libra would need a license to operate in the EU, a spokeswoman for the European Commission told Reuters that an authorization would likely be necessary. But “with the publicly available information on Libra, it is currently not possible to say which exact EU rules would apply,” she added.

In Switzerland, Libra is applying for a payment service license, although it could face rules that typically apply to banks, regulators in the non-EU Alpine state said on Wednesday.

The EU-wide legal vacuum has paved the way for smaller states to fill it. Tiny Malta, which already hosts the bloc’s largest online gambling industry and an outsized finance sector, has devised its own framework to attract virtual currency operators.

It is unclear whether Malta and other smaller EU states would agree with Le Maire’s tough stance on Libra and cryptocurrencies.

Reporting by Francesco Guarascio; Additional reporting by Joseph Nasr in Berlin and Katie Paul in San Francisco; Editing by Louise Heavens and Matthew Lewis

Germany’s Scholz: We cannot accept parallel currencies such as Facebook’s Libra

BERLIN (Reuters) – German Finance Minister Olaf Scholz said on Tuesday policymakers could not accept the emergence of parallel currencies such as Facebook’s ( FB.O ) planned Libra, adding that Berlin would reject any such plans.

Facebook’s planned Libra is the most well-known of the stablecoins, a certain form of cryptocurrency backed by assets such as traditional money deposits, short-term government securities or gold.

“We cannot accept a parallel currency,” Scholz said during a panel discussion in Berlin. “You have to reject that clearly.”

The German cabinet is expected to adopt a comprehensive blockchain strategy on Wednesday which aims to boost the digital transformation of its economy but also tackle the risks stemming from such new technologies.

In its blockchain strategy, Berlin says it will liaise closely with its European and international allies to prevent stablecoins from becoming alternative currencies, according to a government document seen by Reuters.

“The Federal Government will work at European and international level to ensure that stablecoins will not become an alternative to official currencies,” the document said.

Berlin will intensify its existing dialogue with the Bundesbank, Germany’s national central bank, about digital central bank money in order to explore the current state of developments and address possible risks, the document said.

The German government also aims to propose legislation this year which would allow the introduction of blockchain-based electronic bonds, the document showed.

France and Germany on Friday said Facebook’s Libra currency posed risks to the financial sector that could block its authorization in Europe, and backed the development of an alternative public cryptocurrency.

The criticism came as the European Central Bank said it was working on a long-term plan to launch a public digital currency that could make projects such as Libra redundant.

On Tuesday, ECB board member Francois Villeroy de Galhau said stablecoins like Facebook’s Libra highlighted gaps in rules and the media giant’s payments project faced a tough regulatory approach.

Reporting by Michael Nienaber and Christian Kraemer; Editing by Paul Carrel and David Evans

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