Facebook’s plan to release its own cryptocurrency is to be scrutinised by leading banks from around the world.
According to the Financial Times, representatives from Facebook’s Libra division will meet with 26 central banks, including the Bank of England and the US Federal Reserve, in the Swiss city of Basel later today to discuss the cryptocurrency’s “scope and design”.
Benoit Coeure, board member of the European Central Bank and the expected chair of the meeting, warned that “the bar for regulatory approval will be very high” for Facebook to operate in the EU, following concerns that the technology could destabilise traditional currencies, the FT reports.
The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
SUBSCRIBE & SAVE
Sign up for The Week's Free Newsletters
Join more than 350,000 subscribers and keep yourself informed with a selection of The Week’s most interesting, enlightening and entertaining stories - plus daily puzzles.
Join more than 350,000 subscribers and keep yourself informed with a selection of The Week’s most interesting, enlightening and entertaining stories - plus daily puzzles.
Latest Videos FromThe Week
Facebook, meanwhile, said it “welcome[s] this engagement” with the bankers and that the service’s 2020 launch date was chosen to give itself plenty of time to modify Libra to address any regulatory concerns, notes Engadget.
Given Facebook’s history with user privacy, spearheaded by the Cambridge Analytica scandal, its Libra coin has proven controversial from the start.
Shortly after unveiling its coin in June, the company was called to a meeting with the US Senate Committee on Banking, Housing and Urban Affairs to address privacy concerns over the cryptocurrency and its online wallet, Calibra.
Facebook was grilled during the meeting and was told to concentrate on “cleaning up your house” before launching a new product, the BBC says.
What is Libra coin?
Simply put, Libra coin is a cryptocurrency that aims to help Facebook users transfer money to another person via the company’s messaging platform.
The system is underpinned by a blockchain, which Reuters describes as a “shared ledger of transactions maintained by a network of computers”.
Unlike bitcoin, which is self-regulated and is therefore not controlled by one entity, Libra’s blockchain will be “permissioned”, the news site says. This means that “only entities authorised by the governing association will be able to run the computers”.
Facebook states that the virtual currency is aimed in particular at the 1.7 billion people worldwide who don’t have access to a bank account, such as women in developing nations, the BBC reports.
Why is it proving controversial?
The somewhat unknown quantity that is blockchain technology, along with Facebook’s rocky relationship with user data, sparked concerns among the world’s regulators and banks shortly after the coin’s unveiling.
On Thursday, France’s finance minister, Bruno Le Maire, said plans for Libra’s release in the country could not proceed until fears over consumer security and the French government’s monetary sovereignty were addressed, The Guardian reports.
Speaking in Paris at the Organisation for Economic Co-operation and Development (OECD) conference on virtual currencies last week, Le Maire said the French government “cannot authorise the development of Libra on European soil” in its current state, the newspaper notes.
Among the major concerns, the Guardian argues, is that the Libra coin could be used to “abandon national currencies in times of crisis”, which could create complications for governments when managing their economies.
The European Commission has also expressed competition fears over Libra, the FT says. The commission’s antitrust authorities sent Facebook a “questionnaire” as part of a “preliminary investigation” to see whether the virtual coin would “unfairly disadvantage rivals”.
It’s understood that Brussels is “designing a framework” to regulate Libra and other “stable” cryptocurrencies that are “backed by hard assets and currency baskets”, the paper adds.
