Governments around the world went on high alert after American social media giant Facebook announced a permissioned blockchain digital currency, named Libra. Unsurprisingly, the prospect of a privately-backed alternative digital currency didn't exactly excite financial regulators in North America, Europe, and Asia. Here are the…
Governments around the world went on high alert after American social media giant Facebook announced a permissioned blockchain digital currency, named Libra.
Unsurprisingly, the prospect of a privately-backed alternative digital currency didn’t exactly excite financial regulators in North America, Europe, and Asia.
Here are the four countries that really don’t like Facebook’s Libra.
France has, perhaps, been the most vocal opponent of Facebook’s cryptocurrency — stating last Thursday that the country will block the development of Libra.
Citing concerns pertaining to consumer risk and governments’ monetary sovereignty, French Finance Minister Bruno Le Maire stated in a Parisian conference on virtual currencies:
“Libra also represents a systemic risk from the moment when you have two billion users. Any breakdown in the functioning of this currency, in the management of its reserves, could create considerable financial disruption. I want to be absolutely clear: in these conditions, we cannot authorise the development of Libra on European soil […] The monetary sovereignty of countries is at stake from a possible privatisation of money … by a sole actor with more than 2 billion users on the planet.”
Le Maire himself has been an extremely outspoken critic of Libra since Facebook’s self-professed cryptocurrency was announced, repeating claims that the social media behemoth is not capable of protecting its own users’ privacy and data and, thus, should not be trusted with issuing its own currency.
Germany is another European country that is strictly against Facebook’s cryptocurrency.
The country’s Finance Minister, Olaf Scholz, stated yesterday that German policymakers refuse to accept parallel currencies and that Berlin will oppose Libra and any similar projects. He stated in a panel discussion:
“We cannot accept a parallel currency. You have to reject that clearly.”
In line with many countries, Germany is taking a blockchain-not-crypto approach with plans to implement a detailed and thorough blockchain strategy as early as today. That strategy is expected to have little room for the implementation of stablecoins — especially private currencies like Libra — according to a report from Reuters.
A document seen by the international news organization reportedly states:
The Federal Government will work at European and international level to ensure that stablecoins will not become an alternative to official currencies.
Germany also backed up its European counterpart on Friday when France stated that Libra presents risks to the financial sector and must not be allowed on the continent.
The two countries issued a joint statement, which states:
“No private entity can claim monetary power, which is inherent to the sovereignty of nations.”
As one of the world’s economic powerhouses, the United States unsurprisingly took a highly-skeptical stance of one of its homegrown companies attempts to subvert the US dollar with an alternative digital currency.
Almost immediately after Libra was announced, the U.S. Congress asked Facebook to halt development of the cryptocurrency while lawmakers take a good hard look at the situation.
A letter from Congresswoman Maxine Waters, the Democratic head of the house committee on financial services, read:
“Because Facebook is already in the hands of over a quarter of the world’s population, it is imperative that Facebook and its partners immediately cease implementation plans until regulators and Congress have an opportunity to examine these issues and take action […] Failure to cease implementation before we can do so risks a new Swiss-based financial system that is too big to fail.”
U.S. President Donald Trump also took to Twitter to weigh in on Libra, stating that he is neither pro-Bitcoin nor pro-cryptocurrencies and that Facebook must go through the proper regulatory channels if it wishes to become a bank.
Facebook was later grilled in a Congressional hearing by legislators on both sides of the aisle, with politicians like Alexandria Ocasia-Cortez laying the U.S. government’s distrust of Libra on think and heavy.
Given Facebook’s high-profile privacy-related issues, such as the Cambridge Analytica scandal, it is unsurprising that American (and global) lawmakers would be critical of the company’s abilities to pull off its own digital currency.
The People’s Republic of China is another economic powerhouse that isn’t a big fan of Libra — but for slightly different reasons.
The government of the world’s most populous country views Facebook’s cryptocurrency as a competitor to its own central bank-issued cryptocurrency, which is currently in development.
Like other countries’ central banks, PBOC is unwilling to allow a private currency to undermine its financial authority in the country. The central bank’s director, Wang Xin, recently asked:
“If [Libra] is widely used for payments, cross-border payments in particular, would it be able to function like money and accordingly have a large influence on monetary policy, financial stability and the international monetary system?”
An answer in the affirmative would certainly not fall in line with how the government of China operates.
Adding more concern for Chinese authorities is the fact that the US dollar may play a large role in backing Libra. Wang Xin also noted:
“If the digital currency is closely associated with the US dollar, it could create a scenario under which sovereign currencies would coexist with US dollar-centric digital currencies. But there would be in essence one boss, that is the US dollar and the United States. If so, it would bring a series of economic, financial and even international political consequences.”
At the end of the day, there remain common threads among countries that have taken a strong anti-Libra stance — namely, that they do not trust Facebook to properly protect users’ privacy and that they are unwilling to allow the private company to subvert the financial systems that are already in place.