Is Libra Threatening The National Banking Sovereignty?
By Nikolay Peshev on ALTCOIN MAGAZINE
When 11 European countries joined the euro in 1999, they voluntarily renounced their national currencies. They not only said yes to a new currency as a medium of exchange but deliberately decided to transfer some of their sovereignty to the European level, French Economy and Finance Minister Bruno Le Mer wrote on the Financial Times.
With its Libra Global Digital Currency Plan, Facebook has shown both economic and political ambitions. The project will mean a private company controlling the public good and taking on tasks that are usually performed by states. This is unacceptable for both economic and political reasons.
The 2.4 billion Facebook users will provide Libra with immediate global reach. The purpose of the currency is to improve cross-border transactions, which remain too slow and expensive. Libra will also be tied to a currency basket and managed by a group of private companies. All of this raises serious concerns.
In addition to the well-known risks such as money laundering, terrorist financing and data and consumer protection issues, Libra’s global ambition can create antitrust risks and undermine financial stability. The current legal framework is not ready to manage all these risks, nor would it protect consumers using that currency.
Could regulatory measures address all these risks? The answer is no because Libra wants states to share their monetary sovereignty with private companies. In volatile countries where many do not have access to a bank account or hard currency, people can simply stop using the national currency and instead turn to a private one. Some countries may transfer their monetary sovereignty and control over their economies.
Libra can also undermine monetary policy in developed countries. The decision of the private actors behind the project to change the amount of currency in the basket can dramatically change its value without any public authority having a say.
Do we really want to give such private power such power given the effects on trade and financial stability? I cannot allow one of the most powerful instruments of a sovereign state — monetary policy — to fall within the competence of entities not subject to democratic scrutiny.
In the euro area, the independence of the European Central Bank is guaranteed by EU treaties. The members of the Executive Board of the ECB are selected by the democratically elected leader of the European Council. Libra owners, on the other hand, will not be held accountable to governments, parliaments or even central bankers. This is irresponsible. The monetary sovereignty of states is underpinned by the freedom of choice of their citizens.
Does this mean that we have to reject any technological developments in financial services? Of course not. France advocates the opposite. President Emmanuel Macron is pushing for a legal framework for new technologies to help France become a leader in technological and financial innovation. We have created an innovative legal framework for blockchain technology. We must continue these efforts and find ways to meet consumer expectations for upgraded payment methods.
That is why I have invited my European partners and G7 members to look two ways ahead. First, we need to develop innovative national and cross-border payment methods that are faster and cheaper. We expect banks and payment operators to come up with solutions quickly. Second, we need to consider the creation of central banks’ own digital currencies in the medium to long term. We cannot leave China to be the only player in this field. Our independence is at stake. France’s position is clear: we want financial innovation to respect the sovereignty of states. Neither political nor monetary sovereignty can be shared with private interests.
