Why is France’s finance minister at war with Facebook’s cryptocurrency?

On Thursday September 13, the French Finance Minister expressed his opposition to the development of the digital currency in Europe, asserting that: …
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Bruno Le Maire has found a punching bag: Libra, Facebook’s blockchain currency project. On Thursday September 13, the French Finance Minister expressed his opposition to the development of the digital currency in Europe, asserting that: “Our monetary sovereignty is at stake.”

“It’s a bit like Bruno Le Maire versus Libra Act II or Act III,” Loïc Sauce, an economist and cryptocurrency expert at the Institute of Higher Education in Marketing and Commerce (ISTEC), told FRANCE 24. Le Maire has been wary of the project since Facebook announced in June its plan to enable its nearly two billion users to pay and send money with its new currency, Libra.

Protecting the government’s domain

Initially circumspect, Le Maire has since become openly hostile to the plan. In addition to the risk to sovereignty, he has also cited the “danger to consumers” and “systemic risk” when talking about Libra.

“The minister’s reaction is understandable. The power to mint coins is historically the prerogative of the state. Now there is a group of private enterprises (the Libra Association the non-profit that will oversee the currency includes companies such as MasterCard, Uber, Spotify and Vodaphone) saying that their currency is more useful than those being employed in the territories where Facebook is present,” said Michel-Emmanuel de Thuy, digital director at 99 Advisory, a management consulting firm that specialises in the financial sector.

Le Maire hasn’t shied away from hitting Facebook where it hurts. By raising the issue of monetary sovereignty, Le Maire is insinuating that, if successful, Libra could interfere with monetary policies, de Thuy noted. If two billion people turn to Libra for a portion of their online transactions, “governments risk losing control over a significant part of financial flows, which would deprive them of information that is important for determining monetary policy,” said Nathalie Janson, an economist and bitcoin specialist at the Neoma Business School.

For the time being, Facebook is only considering using Libra to allow its users to transfer funds through its site or its messaging services (WhatsApp, Messenger) and to pay some of its merchant partners online. “But as technological progress accelerates, some countries may fear that this dematerialised currency will, in the not too distant future, be used to pay for everyday purchases, such as baguettes,” de Thuy said.

Facebook ‘too big to fail’

In a world where Libra is established as a currency that competes with the euro, the dollar, or other currencies, Facebook would become de facto “too big to fail”, like the banks that governments cannot let go bankrupt for fear of destabilising their entire economies. If Mark Zuckerberg’s Facebook empire were to collapse, the money that users had in their Calibra virtual portfolios managed by Facebook “would not be covered by a government guarantee, as can be the case with bank accounts, and the losses could affect the entire economy. This is the systemic risk that Bruno Le Maire is referring to,” Janson explained.

These worst-case scenarios remain hypothetical and Libra is still in the development stages. But Le Maire believes that prevention is better than cure. He is not the only one: American senators also strongly expressed their opposition to Facebook’s planned currency during the July 2019 hearing of David Marcus.

But figuring out how to respond is not easy. “Lawmakers could, at most, prohibit the payment of taxes in Libra and a court could sanction a contract that uses this currency as a means of payment,” Janson said. Sauce concurred. “Beyond that, the state’s means of intervention are very limited. If an American website, for example, decides to allow payment in Libra, France cannot prohibit it,” he said.

A public cryptocurrency to counter Libra?

Likely aware of those limits, Le Maire seems to be in favour of creating a digital currency managed by central banks a kind of public Bitcoin – in response to Libra. In an interview with La Croix newspaper (and without ever mentioning Facebook’s initiative) he explained that such a digital currency would have the advantage of making “transactions faster and cheaper” (because there would be fewer costs associated with cash management) and would facilitate access to financial services for “less bankable” populations. These are, almost word for word, the advantages Facebook cited when presenting Libra.

Le Maire drove the point home on September 13 by issuing a joint statement with his German counterpart, Olaf Scholz, urging the European Central Bank (ECB) to “accelerate its thinking on a public digital currency”.

“This idea of a public virtual currency has been discussed by central banks for years, but has never been a priority. In a sense, it can be said that the threat of the arrival of Libra has made the debate on the modernisation of the currency more pressing,” de Thuy said.

Such a currency would have the advantage over Facebook’s of “benefitting from the official guarantee of the central bank”, Janson said. But all of the European governments would need to agree on its creation, first in principle and then on the details. In other words, Facebook may have time to introduce its Libra and cash in before the ECB even has a chance to propose an alternative.

The battle between certain countries including France and Facebook for the future of currency could have an unintended victim: the pioneering spirit of cryptocurrencies. Both Libra and the public project proposed by Le Maire call for systems controlled by a central body; whether it is the Libra Association in Geneva or the ECB. These projects are far from the ideal defended by Bitcoin’s promoters, who want to establish a system that would be free of intermediaries, such as banks, and of organisations at the top of the pyramid. Whether it is Libra or a public digital currency that gains a foothold, either would be a blow to the revolutionary ambitions of the original cryptocurrency movement, which aimed to establish a new financial system, Janson concluded.

<span lang=”EN-US”><span>This article was adapted from the original in French.</span></span>

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France, Germany oppose Facebook’s Libra, back public cryptocurrency

The criticism came as the European Central Bank said it was working on a long-term plan to launch a public digital currency that could make projects …

France and Germany said on Friday that Facebook Inc’s Libra currency posed risks to the financial sector that could block its authorisation in Europe, and backed the development of an alternative public cryptocurrency.

The criticism came as the European Central Bank said it was working on a long-term plan to launch a public digital currency that could make projects such as Libra redundant.

Virtual currencies pose risks to consumers, financial stability and even “the monetary sovereignty” of European states, France’s finance minister, Bruno Le Maire, and his German counterpart, Olaf Scholz, said in a joint statement issued at a meeting of euro zone finance ministers in Helsinki.

“France and Germany consider that the Libra project, as set out in Facebook’s blueprint, fails to convince that those risks will be properly addressed,” they said.

The 19-country euro zone bloc is united in pursuing a tough regulatory approach should Libra seek authorisations to operate in Europe, officials said at the meeting.

It is also considering a common set of rules for virtual currencies, which are currently largely unregulated.

The currency union has worked in past years on several plans to make digital payments cheaper and faster, but none of them has properly taken off so far.

The Libra Association, a 28-member organisation Facebook is setting up in Switzerland to manage the currency, said it welcomed the feedback.

Members “are committed to working with regulatory authorities to achieve a safe, transparent and consumer-focused implementation of the Libra project,” Dante Disparte, the group’s head of policy and communications, said in a statement.

WAKE-UP CALL

Plans unveiled in June by US social media giant Facebook to launch its own digital currency, Libra, for payments among its hundreds of millions of users in Europe and around the world have triggered a rethink.

Libra was “a wake-up call”, European Central Bank (ECB) board member Benoit Coeure told a news conference in Helsinki after a meeting of euro zone finance ministers.

He said Libra had revived efforts to widen the uptake of an ECB-backed project for real-time payments in the euro zone, known as TIPS. The project, launched last year, has been met with caution by banks.

“We also need to step up our thinking on a central bank digital currency,” he added, unveiling a so far little-known plan.

An ECB official said the project could allow consumers to use electronic cash, which would be directly deposited at the ECB, without need for bank accounts, financial intermediaries or clearing counterparties.

These actors are all needed now to process digital payments, but may no longer be necessary if the ECB took over their functions, slashing transaction costs. Libra’s plan also would do without financial intermediaries.

Work on the ECB project started before the launch of Libra and could last months or even years, Coeure said. The technical feasibility remains to be seen and opposition from banks is likely. He will present a report on virtual currencies to G7 finance ministers next month, officials said.

Le Maire said one of the purposes of this initiative was to make sure that banks reduce fees on international payments.

“We encourage European central banks to accelerate work on issues around possible public digital currency solutions,” Le Maire said in the joint statement with Germany’s Scholz.

LEGAL LIMBO

While euro zone ministers seem united on a tough regulatory line on Libra, it is less clear whether they agree to set up common rules for virtual currencies.

The EU’s financial services commissioner, Latvia’s Valdis Dombrovskis, is always careful to underline that cryptoassets are an opportunity as much as a threat.

The EU does not have specific regulations on cryptocurrencies, which until Libra was unveiled had been considered a marginal issue by most decision-makers because only a tiny fraction of bitcoins or other digital coins are converted into euros.

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 crime.

But apart from that, virtual currencies move in what is largely a legal limbo in the EU, as regulators have not yet managed to agree on whether to treat them as securities, payment services or currencies in themselves – the latter option being ruled out by most.

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.

When asked whether Libra would need a licence to operate in the EU, a spokeswoman for the European Commission told Reuters that an authorisation would likely be necessary. But “with the publicly available information on Libra, it is currently not possible to say which exact EU rules would apply,” she added.

In Switzerland, Libra is applying for a payment service licence, although it could face rules that typically apply to banks, regulators in the non-EU Alpine state said on Wednesday.

The EU-wide legal vacuum has paved the way for smaller states to fill it. Tiny Malta, which already hosts the bloc’s largest online gambling industry and an outsized finance sector, has devised its own framework to attract virtual currency operators.

It is unclear whether Malta and other smaller EU states would agree with Le Maire’s tough stance on Libra and cryptocurrencies.

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France and Germany will block Facebook’s Libra; want to build public cryptocurrency

Update: France and Germany have agreed to block Facebook’s Libra cryptocurrency, the French finance ministry said on Friday. In a joint statement, …

ReutersSep 14, 2019 14:45:00 IST

Update: France and Germany have agreed to block Facebook’s Libra cryptocurrency, the French finance ministry said on Friday.

In a joint statement, the two governments affirmed that “no private entity can claim monetary power, which is inherent to the sovereignty of nations”.

French Finance Minister Bruno Le Maire said on Thursday that Facebook’s new cryptocurrency should not be allowed to operate in Europe while concerns persist about sovereignty and persistent financial risks.

France and Germany will block Facebooks Libra; want to build public cryptocurrency

Facebook Libra. Image: Reuters.

Original article:

France and Germany said on Friday that Facebook’s Libra currency posed risks to the financial sector that could block its authorisation in Europe, and backed the development of an alternative public cryptocurrency.

The criticism came as the European Central Bank said it was working on a long-term plan to launch a public digital currency that could make projects such as Libra redundant.

Virtual currencies pose risks to consumers, financial stability and even “the monetary sovereignty” of European states, France’s Finance Minister Bruno Le Maire and his German counterpart, Olaf Scholz, said in a joint statement issued at a meeting of euro zone finance ministers in Helsinki.

“France and Germany consider that the Libra project, as set out in Facebook’s blueprint, fails to convince that those risks will be properly addressed,” they said.

The 19-country euro zone bloc is united in pursuing a tough regulatory approach should Libra seek authorisations to operate in Europe, officials said at the meeting.

It is also considering a common set of rules for virtual currencies, which are currently largely unregulated.

The currency union has worked in past years on several plans to make digital payments cheaper and faster, but none of them has properly taken off so far.

Wake-up call

Plans unveiled in June by U.S. social media giant Facebook to launch its own digital currency, Libra, for payments among its hundreds of millions of users in Europe and around the world have triggered a rethink.

Libra was “a wake-up call”, European Central Bank (ECB) board member Benoit Coeure told a news conference in Helsinki after a meeting of euro zone finance ministers.

He said Libra had revived efforts to widen the uptake of an ECB-backed project for real-time payments in the euro zone, known as TIPS. The project, launched last year, has been met with caution by banks.

“We also need to step up our thinking on a central bank digital currency,” he added, unveiling a so-far little known plan.

An ECB official said the project could allow consumers to use electronic cash, which would be directly deposited at the ECB, without need for bank accounts, financial intermediaries or clearing counterparties.

These actors are all needed now to process digital payments, but may no longer be necessary if the ECB took over their functions, slashing transaction costs. Libra’s plan also would do without financial intermediaries.

Work on the ECB project started before the launch of Libra and could last months or even years, Coeure said. The technical feasibility remains to be seen and opposition from banks is likely. He will present a report on virtual currencies to G7 finance ministers next month, officials said.

Le Maire said one of the purposes of this initiative was to make sure that banks reduce fees on international payments.

“We encourage European central banks to accelerate work on issues around possible public digital currency solutions,” Le Maire said in the joint statement with Germany’s Scholz.

Legal limbo

While euro zone ministers seem united on a tough regulatory line on Libra, it is less clear whether they agree to set up common rules for virtual currencies.

The EU’s financial services commissioner, Latvia’s Valdis Dombrovskis, is always careful to underline that cryptoassets are an opportunity as much as a threat.

The EU does not have specific regulations on cryptocurrencies, which until Libra was unveiled had been considered a marginal issue by most decision-makers because only a tiny fraction of bitcoins or other digital coins are converted into euros.

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 crime.

But apart from that, virtual currencies move in what is largely a legal limbo in the EU, as regulators have not yet managed to agree on whether to treat them as securities, payment services or currencies in themselves – the latter option being ruled out by most.

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.

When asked whether Libra would need a licence to operate in the EU, a spokeswoman for the European Commission told Reuters that an authorisation would likely be necessary. But “with the publicly available information on Libra, it is currently not possible to say which exact EU rules would apply,” she added.

In Switzerland, Libra is applying for a payment service licence, although it could face rules that typically apply to banks, regulators in the non-EU Alpine state said on Wednesday.

The EU-wide legal vacuum has paved the way for smaller states to fill it. Tiny Malta, which already hosts the bloc’s largest online gambling industry and an outsized finance sector, has devised its own framework to attract virtual currency operators.

It is unclear whether Malta and other smaller EU states would agree with Le Maire’s tough stance on Libra and cryptocurrencies.

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Facebook’s Libra cryptocurrency faces being blocked in Europe

Facebook, already dealing with scrutiny and concerns from U.S. lawmakers about its plans for its Libra cryptocurrency, now is facing some hostility …

Facebook, already dealing with scrutiny and concerns from U.S. lawmakers about its plans for its Libra cryptocurrency, now is facing some hostility from financial corners in Europe.

At a financial policy forum in Paris, French Finance Minister Bruno Le Maire said France will move to block Facebook from developing Libra in Europe on the grounds that “the monetary sovereignty of (European) countries” is a stake if the tech giant is allowed to proceed with its cryptocurrency plans. According to a report in the British publication The Guardian, Le Maire said that with regards to Libra’s current status, there is no way France could support the cryptocurrency until concerns about risks to consumers and governmental financial institutions could be adequately resolved.

“I want to be absolutely clear: In these conditions, we cannot authorize the development of Libra on European soil,” Le Maire said.

Facebook introduced Libra in June by saying the digital currency would be backed by 28 companies, including Uber, Spotify, Visa and its own new subsidiary, Calibra, in a Switzerland-based group called the Libra Association. Those companies committed $10 million toward Libra’s development. At the time it announced the formation of the Libra Association, Facebook said a digital wallet allowing individuals to use Libra in Facebook’s app, Messenger and WhatsApp services would debut in 2020

However, almost from the start, Facebook’s cryptocurrency efforts were met with skepticism from some in Congress. In July, Treasury Secretary Steven Mnuchin spoke before Congress about the possibility of Libra being used for illegal activities online, and how it would be subject to governmental regulation.

There have also been reports of dissension among Libra’s backers, with some said to be considering dropping out of the project, or not wanting to be seen publicly backing Facebook’s cryptocurrency efforts.

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Libra and cryptocurrencies must be regulated, says France

Cryptocurrencies are based on decentralised technologies called distributed ledgers. These serve as public, open-source databases that can be used …

The European Union should create a common set of rules for virtual currencies, currently largely unregulated in the bloc, to counter risks posed by Facebook’s pseudo-cryptocurrency Libra, the finance minister of France said on Friday.

The 28-nation EU does not have specific regulations on cryptocurrencies, which have so far been considered a marginal issue by most decision-makers because only a tiny fraction of bitcoins or other digital coins are converted into euros.

But plans unveiled in June by United States social media giant Facebook to launch its own digital currency, Libra, for payments among its hundreds of millions of users in Europe and around the world have triggered a rethink.

Libra could cause risks to consumers, financial stability and even “the sovereignty of European states”, France’s Bruno Le Maire told reporters at a meeting of EU finance ministers in Helsinki.

He repeated his pleas for blocking Libra in Europe, and called for the creation of “a common framework” on digital currencies at the EU level.

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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 crime.

Libra is, strictly speaking, not really a cryptocurrency.

Cryptocurrencies are based on decentralised technologies called distributed ledgers. These serve as public, open-source databases that can be used to conduct financial transactions and serve as a platform for the creation of new units (or “coins”). The most famous cryptocurrency is bitcoin.

Libra, on the other hand, is more like a standardised, cross-border monetary unit and online payment system.

Legal limbo

Virtual currencies move in what is largely a legal limbo in the EU, as regulators have not yet managed to agree on whether to treat them as securities, payment services or currencies in themselves – the latter option being ruled out by most.

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.

When asked whether Libra would need a licence to operate in the bloc, a spokeswoman for the EU’s executive branch, the European Commission, told Reuters: “With the publicly available information on Libra, it is currently not possible to say which exact EU rules would apply.”

“It is likely that the project will require some form of authorisation in Europe, depending on its precise features,” she added.

Facebook’s Libra cryptocurrency: A threat to national economies? | Counting the Cost

In Switzerland, Libra is applying for a payment-service licence, although it could face rules that typically apply to banks, regulators in the non-EU Alpine state said on Wednesday.

The EU-wide legal vacuum has paved the way for smaller states to fill it. Tiny Malta, which already hosts the bloc’s largest online gambling industry and a big finance sector, has devised its own framework to attract virtual currency operators.

It is unclear whether Malta and other smaller EU states would agree with Le Maire’s tough stance on Libra and cryptocurrencies.

Le Maire said the bloc should also work to cut the cost of international payments, which Libra promises to slash.

However, a European plan to develop instant, cheaper payments has been slow to take off.

Real-time payments have been possible in the eurozone since 2017, but only about half of the bloc’s banks have joined the scheme that underpins these transactions, and it is mostly used for domestic payments.

Le Maire also said Europe should consider “a public digital currency” that could challenge Libra. He said he would discuss this issue with other ministers next month.

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