Libra could undermine ECB's powers, a board member warns

Facebook’s proposed Libra currency could undermine the European Central Bank’s ability to set monetary policy and Europe should ignore its siren call of “treacherous promises” , ECB board member Yves Mersch said on Monday.

“Depending on Libra’s level of acceptance and on the referencing of the euro in its reserve basket, it could reduce the ECB’s control over the euro, impair the monetary policy transmission mechanism by affecting the liquidity position of euro area banks, and undermine the single currency’s international role,” Mersch warned, cited by Reuters. Like regular currencies, Libra would be highly centralized, an “extremely concerning” setup since it is not backed by a lender of last resort and it is ultimately accountable to shareholders, who are not seen as repositories of public trust, he pointed out.

“It is scheduled for release in the first half of 2020 by the very same people who had to explain themselves in front of legislators in the US and the EU on the threats to our democracies resulting from their handling of personal data on their social media platform,” Mersch also said. Given these challenges, European regulatory and supervisory authorities need to assert jurisdiction over Libra and also need global cooperation to mitigate its risks, he believes.

Mersch hopes that Europeans “will not be tempted to leave behind the safety and soundness of established payment solutions and channels in favour of the beguiling but treacherous promises of Facebook’s siren call.”

 

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