Yves Mersch, a board member of the European Central Bank, has said that Facebook’s proposed cryptocurrency, Libra, could undermine the European Central Bank’s ability to set monetary policy on the continent. Mersch even went as far as saying that Facebook’s Libra offered “treacherous promises” and dubbed it a “siren call”. The ECB appears to be the latest opponent of the proposal after China, Japan, and France.
When Mersch likens Libra to a siren call, he refers to the fact that Libra is easy to access on Facebook-run services, and that users will be able to transfer money at little to no cost, unlike today where cross-border payments require currency-exchange fees or remittance fees. Libra will be backed by four fiat currencies from around the world. Mersch highlighted that Libra is also not backed by a lender like traditional currencies and ultimately shareholders would be accountable.
Commenting on Libra, Mersch said:
“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.
“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 United States and the European Union on the threats to our democracies resulting from their handling of personal data on their social media platform.
“I sincerely hope that the people of Europe 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.”
Facebook is currently eyeing a 2020 launch but with all the opposition by central banks and governments, it’s unclear if it will be allowed to operate in many jurisdictions. If it does launch, one survey, albeit conducted by a rival company, suggested less than three percent of people would even use Libra.