Facebook’s announcement that it was launching its own cryptocurrency has caused controversy. Some have backed the move, saying that it will bring great benefits around the world. But it’s also received criticism, especially over regulation issues.
In light of this, the Economic and Financial Committee (EFC) is planning to further investigate and analyse the potential risks of the currency, Libra, and how it could be regulated in the future.
The analysis note will be sent to each member state in the coming weeks. Following this, at the EFC meeting, the issues will be discussed by national governments.
In addition, regulators will discuss whether Libra should be regulated as e-money, virtual currency, or a financial instrument. If it is considered to be a digital asset, it would be regulated under the Markets in Financial Instruments Directive (MiFID II), the Anti-Money Laundering directives or another independent regulator.
ECB’s executive member Yves Mersch warned that Libra “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, for instance by reducing demand for it.”
“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 favour of the beguiling but treacherous promises of Facebook’s siren call.”
Libra is being backed by a number of major multinational corporations, including MasterCard and Uber. Another matter that will be discussed will be the effect it will have sovereign currencies, and the potential volatility of the digital currency.
Of course, Libra’s backers are looking for confirmation that the currency will remain stable. But as well as this, regulators are also concerned that it could cause global instability, especially since the payment method would be available to a large audience – Facebook has nearly 2.4 billion users in total.
The EFC will debate these issues at its upcoming meeting, and is planning to respond before the predicted launch date of Libra, which Facebook had initially planned for early next year, although this has now been postponed.
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