Facebook is set to undergo further scrutiny of its cryptocurrency plans on September 16 as global regulators meet with Libra representatives in Basel amid concerns over the threat the currency poses to the financial stability of the European Union.
Officials from 26 central banks, including the US Federal Reserve and the Bank of England, are expected to question Facebook over the digital money’s “scope and design,” with a report to be filed for G7 finance ministers in October.
Benoit Couere, the European Central Bank executive board member who will chair the meeting, recently warned that “the bar for regulatory approval will be very high.”
Speaking after a meeting of EU finance ministers in Helsinki on September 13, Couere said it was time for regulators to “step up our thinking on a central bank digital currency,” a sentiment shared by French Finance Minister Bruno Le Maire, who said Europe should consider its own public digital currency to challenge Libra. Le Maire said the potential for a possible EuroCoin will be discussed with his counterparts in the EU at the October meeting, stating that France will not authorize the development of Libra on European soil.
“Under the current conditions, we should refuse the development of Libra in the EU,” said Le Maire, adding that digital currency threatens the monetary sovereignty of governments and voicing concerns about the potential of Libra to encourage people to abandon national currencies during a crisis.
Despite the backlash, Libra’s founders welcomed the opportunity to meet with regulators in Switzerland.
“In the nearly three months since the intent to launch the Libra network was announced, we have prioritized engagement with regulators and policymakers around the world,” Libra said. “We welcome this engagement and have deliberately designed a long launch runway to have these conversations, to educate stakeholders and incorporate their feedback in our design.”
Facebook has pitched Libra as a way to democratize money, providing banking services that will be independent of any one country – which has officials and critics worried. Regulators and governments of the world have been scrambling for more information about the scope and design of Libra. European policymakers are particularly concerned that the currency will become popular in the EU due to the difficulties that consumers currently have with cross-border payments.
Brussels has acted quickly in response to the rising popularity of digital currencies and is in the early stages of designing a framework to regulate them, Libra included.
“There are certain concerns about the financial stability implications,” said Valdis Dombrovskis, EU vice president in charge of financial services. “The risks need to be fully understood and the EU needs to act in a unified way.”