ECB Board Member is “Extremely” Concerned about Facebook’s Libra’s High Centralization, Shills Fiat Money
- Ignore “treacherous promises” of the Facebook
- Libra could reduce ECB’s control over the Euro
- Highly centralized which is extremely concerning
Facebook’s proposed cryptocurrency called Libra — scheduled for release in the first half of 2020 — according to European Central Bank’s board member Yves Mersch undermines ECB’s ability to set monetary policy.
Mersch said Europe should ignore “treacherous promises” of the same people that had to explain themselves in front of the legislators on the threat of democracy resulting from their handling of personal data.
“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 on Monday.
Don’t be tempted to ignore Euro in favor of Facebook’s siren call
Facebook announced its plans for a new digital coin earlier this year that will be backed by four fiat currencies.
Just like regular currencies, Libra would be highly centralized which is an “extremely concerning” set up, he said because unlike fiat money Calibra — fully owned subsidiary of Facebook that will manage Libra-based payment services — is only accountable to shareholders.
Talking about legal and regulatory challenges with Libra, Mersch said whether it classifies as e-money, as a financial instrument or as a virtual currency is one of the challenges.
As such, European regulatory and supervisory authorities need to establish jurisdiction over Libra and requires cross-border cooperation and coordination to mitigate its risks.
“I sincerely hope that the people of Europe will not be tempted to leave behind the safety and soundness of established payment solutions and channels in favor of the beguiling but treacherous promises of Facebook’s siren call,” Mersch added.
Most credible form of money is backed by strong institutional backing
He might have pointed out the differences between Libra and cryptocurrencies and issues with its so-called stablecoin, but this only lead to him shilling the fiat currencies.
“The notion of stateless money is an aberration with no solid foundation in human experience,” he said.
Money according to him can only inspire trust and fulfill its key socioeconomic functions if it is backed by an independent but accountable public institution.
“Of the various forms that money has taken throughout history, those that have best fulfilled their purpose and proven the most credible have invariably benefited from strong institutional backing.”
He said only a central bank can issue reliable forms of money, so
“private currencies have little or no prospect of establishing themselves as viable alternatives.”
The fact that crypto can only fulfill some of the functions of money, it will serve as “useful reminder of central banks' pivotal role as responsible stewards of public trust in money,” he said.