Facebook’s cryptocurrency, Libra has met a few stumbling blocks since it was announced about three months ago, following the realization that it could reduce the European Central Bank’s control over the euro and threaten the economy as well.
These new realizations have now raised a dark cloud over the future of Libra since several bankers, politicians and regulators have continued to register their distrust for the digital currency that is expected to launch in first half of 2020. Ministers from the Group of Seven (G7) major economies are also worried that in July, projects like Libra could “raise serious regulatory and systemic concerns, as well as wider policy issues”.
[READ MORE: Facebook’s Co-founder revealed something about Libra that should interest Emefiele]
What you should know about Libra: Recall that Facebook announced its plans to float Libra in June. The idea is expected to allow Facebook users send money to one another and pay for goods and services through Facebook’s linked apps such as Messenger and Whatsapp.
The digital currency will be backed by a reserve of assets which can be used to make payment both online and offline and thus strengthen Libra over price fluctuations that hit pioneer digital currency schemes like Bitcoin.
Ripple effect: The fear that it could reduce the European Central Bank dominance is real and Yves Mersch, a board member at the Frankfurt institution strongly raised his concerns.
“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. What’s more, the cryptocurrency could impair the monetary policy transmission mechanism by affecting the liquidity position of euro area banks, and undermine the single currency’s international role, for instance by reducing demand for it,” he stated.
[ALSO READ: How Facebook plans to combat fake news in Nigeria and other African countries]
Facebook’s strength: With two billion Facebook users around the world, the potential for Facebook to draw more users to Libra for online shopping, financial services and payments is very possible. If Facebook leverages on this alone, Europe may just get another new currency.
“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,” Mersch said.
The bottom line: Following the concerns raised by the European Central Bank, will Libra not see the light of day?
[READ FURTHER: 4 Industries Impacted by Bitcoin Usage]
