ECB's Mersch on "private currencies" and Facebook Libra cartel

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In a recent speech held during the European Central Bank's Legal Forum in Frankfurt, ECB Executive Board Member Yves Mersch criticised private currencies and especially Facebook's Libra. Mr Mersch focussed on three main points:
  1. How is Libra different from other private currencies and from public money?
  2. What are the legal and regulatory challenges associated with Libra?
  3. What position should a central bank, such as the ECB, take towards Libra?
Regarding the first question, he sees no significant differences between Libra and other private currencies in terms of the technical setup. That is, Libra will be issued via a public ledger much like other cryptocurrencies. He does point out some risks associated with Libra, however: In addition to the complexity of the proposed Libra system, Mr Mersch said it was also "cartel-like", because Libra coins would be issued exclusively by the Libra Association. The Libra Association is a group of global players in the payments and technology space who are only accountable to their shareholders but not to the users of the Libra currency. All payment services on the Libra blockchain would be managed by a subsidiary of Facebook named "Calibra". In this regard, Libra is not really a decentralised currency with open access as would be the case with other cryptocurrencies, according to Mersch. Combined with Facebook's history as a company that did not put its users' privacy concerns at the top of its agenda for a long time, these points are disconcerting.

As for regulatory challenges, it is not clear how to classify Libra: Is it e-money, is it a digital currency, or is it a financial instrument? Depending on how you answer that question, Libra would be regulated differently. It might fall under MiFID II or the Fourth Anti-Money Laundering Directive, for instance. Also, given Libra's design as a global currency, there is the challenge of considering international interests and achieving a much closer cooperation amongst regulators across the globe.

You can read a full transcript of Mr Mersch's speech on the ECB website:
https://www.ecb.europa.eu/press/key/date/2019/html/ecb.sp190902~aedded9219.en.html
 
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