Germany has delivered a blow against Facebook’s planned cryptocurrency, expanding Europe’s opposition to the social network’s financial ambitions.
While the development of blockchain technology holds great potential, it should not be used to develop private forms of money, the government in Berlin said after the cabinet approved its new blockchain strategy.
“A core element of state sovereignty is the issuance of a currency; we will not allow private companies to do it,” finance minister Olaf Scholz said in an e-mailed statement following the decision.
The criticism from Germany, Europe’s biggest economy, echoes France’s view and scepticism from Washington. Facebook has launched a public relations offensive that has sought to put policy makers at ease.
A key concern from some regulators is that Facebook’s ambition would threaten a core government function: monetary policy. The response from central banks has varied from active engagement as in the case of Singapore, to China considering its own equivalent.
“Europe already has enough trouble keeping its own currency stable,” said Patrick Heusser, senior trader at digital assets brokerage firm Crypto Broker in Zurich. “Euro-area governments see stablecoins like libra as a big threat to the stability of the euro because the economically weaker countries in the euro area might have some citizens who believe that it is better to have their money in a stablecoin.”
Central bank currency
European Central Bank policy maker Benoit Coeure on Tuesday backed Bank of England governor Mark Carney’s call for work on an international central bank digital currency, saying that private stablecoins could challenge the global primacy of the dollar.
David Marcus, the Facebook executive leading the project, posted a series of tweets this week on the same day members of the Libra Association met with regulators convened by a G-7 working group in Switzerland. He argued that creating libra isn’t the digital equivalent of printing US dollars or minting new euros. The simple existence of libra, he says, doesn’t create new value.
Among regulators’ other questions is that the new digital currency will be used by smugglers, drug dealers and terrorists. Another is that the social media giant, which has run afoul of regulators over user data in the past, should not be trusted to handle sensitive financial information. Facebook has said repeatedly it would be just one of many companies managing the new currency. — Reported by Raymond Colitt and Alastair Marsh, (c) 2019 Bloomberg LP