On Facebook's Digital Currency
Last week, France and Germany issued a “Joint Statement on [Facebook’s] Libra” that said,
"France and Germany reaffirm their willingness to tackle the challenges raised by cryptocurrency and so-called stable coin projects: financial security, investor protection, prevention of money laundering and terrorism financing, data protection and financial and monetary sovereignty.
"We acknowledge that there is a need to improve the effectiveness of international payments. At European level, we call today on banks to work on improving European payment systems.
"We encourage European central banks to accelerate work on issues around possible public digital currency solutions."
France’s finance minister Bruno Le Maire said, “I want to be absolutely clear: In these conditions, we cannot authorize the development of libra on European soil …
"The monetary sovereignty of countries is at stake from a possible privatization of money . . . by a sole actor with more than 2 billion users on the planet …
"I don’t see why we should dedicate so much effort to combating money laundering and terrorist financing for so many years to see a digital currency like Libra completely escape those regulatory efforts.”
Separately, a statement by the Swiss Financial Market Supervisory Authority said, “Due to the issuance of Libra payment tokens, the services planned by the Libra project would clearly go beyond those of a pure payment system …
"The highest international anti-money laundering standards would need to be ensured throughout the entire ecosystem of the project"
Finally, US Under Secretary of the Treasury for Terrorism and Financial Intelligence Sigal Mandelker said, “Whether it’s bitcoin, Ethereum, Libra, our message is the same to all of these companies: anti-money laundering and combating the financing of terrorism has to be built into your design from the get-go.”
Notes: 1) Libra is a digital currency proposed by Facebook. 2) The project is backed by 27 organizations in areas such as payment, technology, telecommunication, online marketplace, venture capital and nonprofits, 3) a launch is planned for 2020.
Projects such as Libra present a "wake-up call" to slow moving central banks. They also increase discussions about the sovereignty of money and the future of central banks and other financial intermediaries.
As interest in better global payment platforms increases, successful platforms will require 1) gaining the trust of users, 2) providing a service that is easy to use and understand, and 3) aligning with regulatory processes - which may require updating.
As European central banks oppose the efforts of the Libra project, it is still unclear how the Libra platform will actually work.