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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Fintech company sets up hub in Edinburgh

NORWEGIAN financial technology company EedenBull is creating 20 jobs with its establishment of a hub in Edinburgh, following a £225,000 …

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Oslo-based EedenBull, founded in 2018, already has a presence in London, Dubai and Singapore.

Explaining the factors behind its choice of Edinburgh for the new hub, EedenBull chief executive and co-founder Nicki Bisgaard said: “Access to talent, a thriving fintech scene and governmental support made that an easy decision.’’

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A physical and digital credit card with an application (app) enabled for mobile wallets and wearables, tailored for consumers and small businesses, will be among products and services developed at EedenBull’s technology hub in Edinburgh’s Exchange Place business district.

The Edinburgh hub will also develop a business spend-management programme targeting small and medium-sized enterprises, and a single card platform that connects a user’s accounts and cards to one smart card and one app.

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Scottish Enterprise noted 13 start-up fintech companies had been formed north of the Border so far in 2019. It added that 10 overseas fintech firms had set up a base in Scotland over the past 18 months.

Mr Bisgaard said: “New regulations, new technologies and new players are forever changing the way consumers and businesses think about payments.”

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Industry opposition to no-deal Brexit hardens, says TechUK

TechUK’s findings mirror, to some extent, the findings of another study released earlier this week by financial technology (fintech) trade body Innovate …

More than two-thirds of TechUK members believe a no-deal Brexit on 31 October 2019 will have a negative impact on their business, with questions over skills and recruitment, legal compliance, and continuing data flows between Britain and Europe being some of the biggest worries.

Following a previous study conducted at the end of 2018, TechUK turned again to pollsters Ipsos Mori to quiz 841 members, of which 193 responded, with approximately 41% from businesses with more than 250 staff, 27% from medium-sized firms, and 31% from small businesses employing fewer than 50 people.

Since the previous study, TechUK members have held firm in their views of the impact of a no-deal Brexit, with 71% agreeing it would hurt their businesses (up from 69% last time around), and while more respondents had taken active steps to insulate themselves, this had not made them feel any more positive.

In terms of preparedness, larger businesses tended to say they were either fairly or well prepared for no-deal (87%), while smaller companies were less confident (47%). As of August 2019, over half of small businesses had actually said they had taken no active measures. Those who had not taken any measures tended to say this was because it was impossible to predict the actual implications of no deal.

“In the nine months that have passed since we last surveyed our members, sentiment has not changed about the impact of no deal with the majority of respondents saying it would have a negative impact on their business,” said TechUK CEO Julian David.

“Even for those members we spoke to who have taken steps to prepare for no deal, mainly larger members, it is clear that no deal remains an unattractive outcome.”

“A no-deal Brexit on 31 October will not bring an end to uncertainty for business. The UK will have to return to the negotiating table on 1 November to start talks on a free-trade agreement, with no withdrawal agreement to build on. This will only extend uncertainty and undermine confidence for UK tech businesses.”

The biggest concern arising from no deal among respondents was the overall negative impact on the economy and a slowdown in business, cited by 44%.

A further 12% were most worried about the impact of no-deal on their ability to recruit and retain talent from the EU, while 8% said confusion and uncertainty over various aspects of regulatory compliance was their biggest concern, and a further 8% cited disruptions to the free flow of personal data between Britain and Europe.

TechUK’s findings mirror, to some extent, the findings of another study released earlier this week by financial technology (fintech) trade body Innovate Finance.

Innovate reported that 78% of UK fintech firms were inadequately prepared for no deal, falling to 45% if the UK moves instead into a transition period following a deal at the end of October. Just over a third said they had not taken any steps to prepare at all.

Innovate’s respondents were primarily concerned with financial passporting rights – the regulations that permit banking organisations to serve customers anywhere in the EU, even if they are located in non-Eurozone states – but like the wider tech sector, also discussed issues such as recruitment. Almost 20% said they would consider moving to or basing some operations in a different jurisdiction because of Brexit.

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