Facebook’s plan to revolutionize the global economy with its version of bitcoin hit another snag this week when the French finance minister said the country would block the Libra cryptocurrency if it launches as planned in 2020.
Bruno Le Maire, speaking at a cryptocurrency conference organized by the Organization for Economic Development (OECD) on Thursday, didn’t mince words when it came to the threat posed by Libra to the stability of the French economy by undermining the influence of the euro.
"The monetary sovereignty of countries is at stake [from] possible privatization of money by a sole actor with more than 2 billion users on the planet,” he said.
Le Maire said that during times of economic crisis, citizens may abandon national currencies in favor of Libra, making it very difficult for governments to manage the economy.
“All these concerns around Libra are serious. So I want to say this with a lot of clarity: In these conditions, we cannot authorize the development of Libra on European soil,” Le Maire added.
Libra, which is scheduled to launch in the second half of next year, is designed to be a fast and easy way for people to transfer money around the world, using the company’s Messenger and WhatsApp services.
Facebook is initially pitching the service to the 1.7 billion people in the world without a bank account. In a bid to avoid the wild valuation swings typical of other cryptocurrencies like bitcoin, Libra will be backed by a basket of fiat currencies, like the U.S. dollar.
While France has been one of the most vocal critics of the project since it launched in June, it's far from the only one.
From the very beginning, regulators and lawmakers from Washington to Beijing criticized the project, voicing concerns about how it would be regulated. Watchdogs are particularly concerned about Libra’s possible use by criminals to launder money and finance terrorism.
"I don't think you should launch Libra at all,” congresswoman Carolyn Maloney told Facebook cryptocurrency chief David Marcus at a hearing in Washington in July.
U.S. President Donald Trump, leaders of the G7 nations, and the head of the Bank of England have all expressed concerns about Libra as well.
“Facebook’s Libra ‘virtual currency’ will have little standing or dependability. If Facebook and other companies want to become a bank, they must seek a new banking charter and become subject to all banking regulations, just like other banks,” Trump tweeted in July, adding: “We have only one real currency in the USA, and it is stronger than ever, both dependable and reliable.”
Facebook is not going it alone in the project, with major players like Mastercard, PayPal and Uber announced as official partners back in June. However, in recent weeks, reports have suggested that some partners are getting cold feet as a result of regulatory scrutiny, with the Financial Times reporting that two unnamed partners are considering pulling out of the project.
In an interview with French magazine Les Echos on Thursday, the head of The Libra Association, a Swiss-based nonprofit that is leading the rollout of the cryptocurrency, appeared to wave away Le Maire’s concerns.
“These concerns about the destabilizing effect our reserve currency could have on central banks’ fiat currencies — which figure in our basket — seem unfounded to us,” Bertrand Perez, director-general of the Libra Association, said. “The year we’ve taken prior to release will allow us to iron out all the problems.”
Facebook says it's still on course to launch Libra next year, but with lawmakers in the U.K., U.S. and EU all monitoring its development, further restrictions on the cryptocurrency are possible unless the social network can assuage fears about its destabilizing impact.
Cover: File photo dated 02/04/19 of Facebook CEO Mark Zuckerberg, who will remain as chairman of the social networking giant after an attempt to strip him of the position put forward by a group of shareholders was rejected. Niall Carson/PA Wire URN:43229063 (Press Association via AP Images)