According to reports, France and Germany alluded to Facebook Incorporated’s Libra currency becoming a risk to the financial community as a whole. It could block European financial operations which could affect the development and usability of all public cryptocurrency alternatives.
This particular criticism came as a result of the central bank of Europe’s long-term plan to launch public currencies online that could render other platforms like Libra reduntant.
Different virtual currencies present a lot of risks to various consumers. It could threaten financial stability as well as monetary freedom of most European countries. This statement comes from the French Financial minister as well as his counterpart in Germany at the Euro Zone Finance Ministers’ Meeting in Helsinki.
The two countries see this particular project as something to deal with the risks involved in cryptocurrency transactions.
This particular blockage presents a united front against regulatory approaches in the event Libra seeks any approval for European operations.
It also takes some currently unregulated, but common rules for virtual currencies into account.
In the past, the Currency Union worked on many plans to decrease digital payments to make it more affordable. However, most of them failed.
The Libra Association is welcome to feedback. It is also currently setting up a Switzerland office of 28 members to manage currency operations.
According to its head of policy and communications, the members are working hard with regulatory authorities to achieve safe implementation of the project. They promise to be transparent and focused on consumer relations as well.
Facebook revealed its plans to create its digital currency called Libra in June. It will work as the official forms of payment for various Facebook users in Europe and around the globe. This development made the European financial community think twice.
According to a board member from the European Central Bank in a news conference, they consider this phenomenon a call to action.
The man said that Libra was able to reinvigorate plans to expand the backing of ECB projects involving online payments within the Eurozone. This expansion is known as TIPS, a project that the banks originally considered unacceptable.
Furthermore, the board members added the need to rethink some options on central bank digital currency.
Certain ECB officials also said that this project could pave the way for the usage of electronic cash which the system would store in the ECB without bank accounts and any other kind of financial arbiters.
Banks require secondary mediators for digital payment processing. However, with the looming ECB takeover, these online institutions may not be needed anymore, and therefore decreasing transaction costs.
This process is similar to Libra’s initial design which also does away with go-betweens.
The ECB project began away before the launch of Libra, but could still last for many months or years. Technically speaking, the project’s viability still is yet to be proven, which gives the bank’s room for opposition.
An official report on virtual currencies will be presented next month, according to officials.
In a statement, the ECB project heads stated that one of the many reasons for the said initiative was the reduction of international fees.
Because of this statement, the Central Bank of Europe is encouraged by the two countries to fast-track any solutions on issues regarding public digital currency.
The Legal Purgatory
Euro Zone Ministers united on the Libra regulation front. However, they remain unclear about setting boundaries for other online currencies.
According to the European Union Financial Services Commissioner, he sees crypto assets as both an opportunity and a danger.
Currently, the EU does not have definitive regulations on cryptocurrencies. This phenomenon has been considered an inconsequential issue until Libra came about. Why? Because up until now, only a small percentage of Bitcoin conversion transactions involved euros.
However, newer rules were enforced last year to increase security checks on virtual currencies and their trading venues to reduce the risk of money laundering and other crimes related to finance.
Aside from this, virtual currencies still stand in purgatory as far as the EU is concerned. Regulators haven’t managed to agree on the terms by which to call these currency platforms online. Are these securities? Or payment services? Most people call them official currencies.
Regarding official regulations, the EU is still assessing whether the existing regulations regarding Financial Instruments can work for these new currencies. However, they haven’t decided yet.
The need for official authorization arises according to the commission. Libra should also utilize data accessible to the public. It is impossible to say what exact rules apply in this situation.
Meanwhile, in Switzerland, the company is applying for licenses as a payment service. In this case, it could be subject to bank-related rules and regulations.
This legal vacuum opened the door to two smaller states. Malta which is home to the largest gambling community online has already started to develop their exclusive virtual currency platform.
Right now, it is unclear whether they would take the EU’s site on Libra and online currencies in general.