It looks like Libra can’t catch a break. The global virtual currency of social networking giant Facebook has put in motion a damaging chain of events and has sparked a global backlash. The regulators have been keeping the digital currency in their crosshairs as there have been many questions regarding the financial security of a monetary system of such nature.
Considering all the nations that have been a hurdle in Libra’s path, Europe has certainly been the most difficult. Just last month, Bruno Le Maire, French Minister of the Economy and Finance, said at the opening of the Organisation for Economic Co-operation and Development (OECD) Global Blockchain Policy Forum 2019 in Paris, that Libra threatens “monetary sovereignty” at a global scale. He at that time claimed that the country will block the development of Facebook’s Libra. He had said:
“I want to be absolutely clear: in these conditions, we cannot authorize the development of Libra on European soil.”
Things have taken a more horrific turn for Libra, as a draft document from the European Central bank that is to be discussed at the E.U finance ministers meeting this Friday, has asked the regulators to come up with a consistent approach to all cryptocurrencies, especially Libra, reports state. The draft states that “all options should be on the table,” and that includes a complete block of the stablecoin’s development within European boundaries.
The document has been prepared by Finland, which at the moment holds the six-month rotating presidency of the E.U Council. Besides blocking Libra development as a possible measure, the draft also mentions that Libra, and projects similar to Libra “should not begin operation in the EU” until every regulatory compliance is met and all challenges and risks have been taken care of.
The European Commission had already sent two questionnaires to Facebook regarding Libra, but the lack of clarity surrounding the cryptocurrency “makes it impossible to reach definitive conclusions on whether and how the existing EU regulatory framework applies”, the draft text says.
EU has already been preparing new rules for tokens that are based on blockchain technology for more than two years. EU officials had already anticipated that new legislation would be necessary to tackle this emerging asset class. As of now, decision-makers and regulators want to act “swiftly,” considering the various challenges that Libra poses, says the draft text.
Even though the regulators want to impose strict regulations on Libra, they, however, are aware of the consequences that hasty regulations may impose on other crypto-assets and ‘fintech’ initiatives. Keeping this in focus, the text further mentions that the new rules should be based on “sound evidence” and general principle” applicable to all ‘stablecoins’.
Other than just limiting and controlling ongoing ‘stablecoin’ projects, the EU also wants to offer alternatives for users to replicate their benefits. For this reason, the draft text to be discussed on Friday “encourages” the European Central Bank to continue assessing the benefits of launching its own digital currency, in dialogue with payment companies.