The European Union should create a common set of rules for virtual currencies, currently largely unregulated in the bloc, to counter risks posed by Facebook’s pseudo-cryptocurrency Libra, the finance minister of France said on Friday.
The 28-nation EU does not have specific regulations on cryptocurrencies, which have so far been considered a marginal issue by most decision-makers because only a tiny fraction of bitcoins or other digital coins are converted into euros.
But plans unveiled in June by United States 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 could cause risks to consumers, financial stability and even “the sovereignty of European states”, France’s Bruno Le Maire told reporters at a meeting of EU finance ministers in Helsinki.
He repeated his pleas for blocking Libra in Europe, and called for the creation of “a common framework” on digital currencies at the EU level.
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.
Libra is, strictly speaking, not really a cryptocurrency.
Cryptocurrencies are based on decentralised technologies called distributed ledgers. These serve as public, open-source databases that can be used to conduct financial transactions and serve as a platform for the creation of new units (or “coins”). The most famous cryptocurrency is bitcoin.
Libra, on the other hand, is more like a standardised, cross-border monetary unit and online payment system.
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 licence to operate in the bloc, a spokeswoman for the EU’s executive branch, the European Commission, told Reuters: “With the publicly available information on Libra, it is currently not possible to say which exact EU rules would apply.”
“It is likely that the project will require some form of authorisation in Europe, depending on its precise features,” she added.
In Switzerland, Libra is applying for a payment-service licence, 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 a big 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.
Le Maire said the bloc should also work to cut the cost of international payments, which Libra promises to slash.
However, a European plan to develop instant, cheaper payments has been slow to take off.
Real-time payments have been possible in the eurozone since 2017, but only about half of the bloc’s banks have joined the scheme that underpins these transactions, and it is mostly used for domestic payments.
Le Maire also said Europe should consider “a public digital currency” that could challenge Libra. He said he would discuss this issue with other ministers next month.