Paris, Rome, Berlin preparing to block Facebook’s Libra in Europe

French economy minister says the virtual currency threatens national sovereignty and has ‘no place on European soil’.

Representations of virtual currency are displayed in front of the Libra logo in this illustration picture, June 21, 2019
Libra is due to go online in the first half of 2020, if approved by Swiss regulators [File: Dado Ruvic/Reuters]

France, Italy and Germany are together preparing measures to block Facebook‘s new virtual currency from use in Europe, according to French economy minister Bruno Le Maire.

“Libra is not welcome on European soil,” Le Maire told reporters on Friday on the sidelines of the annual meetings of the World Bank and International Monetary Fund (IMF) in Washington.

“We will take steps with the Italians and Germans because our sovereignty is at stake,” he added.

Le Maire offered few details about what preparations will be made to restrict Libra, which is expected to enter circulation next year.

“It’s the political message which is important,” he said, noting that the virtual currency was due to be backed by a basket of currencies and assets, a principal sticking point.

“All Facebook would have to do would be to decide to use more or fewer dollars or euros to affect the exchange rate between the euro and the dollar, and thus have a direct impact on trade, industry and nations which use the dollar or euro as their base currency,” he said.

This could harm monetary policy and affect governments’ efficiency, he added.

“Do we want to put monetary policy in the hands of a private company like Facebook? My answer is clearly no,” he said.

Still, Le Maire said he was not opposed to the creation of a digital currency, which he said France could develop “in a European framework”.

“The right answer is not a private digital currency under the control of one of the largest multinationals on the planet,” he said, referring to Facebook’s more than two billion users.

The Group of Seven (G7) economies, which met in Washington on Thursday, announced that a legal framework was a non-negotiable condition for “stablecoin” cryptocurrencies, which are backed by other reserve assets.

So long as legal, regulatory and oversight risks have not been resolved to their satisfaction, the G7 will not permit stablecoins to enter circulation, the French G7 presidency said in a statement.

Murky regulatory waters

Last month, Le Maire said the European Union should create a common set of rules for virtual currencies, largely unregulated by the bloc at present. He also called for Libra to be blocked in Europe.

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.

However, 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 crimes.

Earlier on Friday, an international monitoring agency warned of “new risks” from Libra and other virtual currencies.

The Financial Action Task Force said these currencies are being “closely monitored” to ensure they are not used to finance violent campaigns or launder money.

Facebook announced the launch of Libra in June, saying the digital coin will come online in the first half of 2020 if regulators in Switzerland, where the new currency is to be based, give the go-ahead.

The social media giant has created a management tool it has named Calibra, which will offer digital wallets to save, send and spend Libras.

It will be connected to the billion-plus users of the Facebook Messenger and WhatsApp platforms as the network expands beyond social networking into the world of international finance.

Source: Al Jazeera, News Agencies