Facebook's Libra Hits Extra Regulatory Roadblocks in Europe
October 08 2019 - 10:00AM
Dow Jones News
By Valentina Pop
BRUSSELS -- The European Union will introduce legislation aimed
at preventing libra, Facebook Inc.'s proposed digital currency,
from undermining Europe's single currency and being used as a
money-laundering tool -- representing one of the toughest
regulatory responses so far.
Valdis Dombrovskis, who is slated to stay on as vice president
of the European Commission in charge of financial regulation, said
Tuesday that libra posed a systemic risk to the euro, given the
size of the companies that are behind the global
cryptocurrency-based payments network.
"Yes, we will need to regulate libra, to supervise it on an EU
level, both from the perspective of financial stability and the
protection of financial investors," he told EU lawmakers.
"Financial stability, monetary stability, anti-money-laundering
-- these are just a few aspects that need to be considered," Mr.
Dombrovskis later added.
His comments deal a further blow to the social-media giant's
ambitions to transform financial services. Lawmakers and regulators
in the U.S. and Europe were quick to criticize libra after it was
unveiled in June, citing concerns about how Facebook and the
companies involved would protect users' privacy and stop criminals
and terrorists from using it to launder money.
In September, France and Germany called for libra to be blocked,
issuing a joint statement saying that "no private entity can claim
monetary power, which is inherent to the sovereignty of
nations."
Separately, the European Commission, which acts as the EU's main
antitrust enforcer, has launched a preliminary inquiry into
concerns that libra could drive out competitors. Questions on both
the financial stability and the competitive aspect of the planned
currency have been sent to Facebook and the Libra Association of
companies backing the project. Mr. Dombrovskis said he hasn't yet
heard back.
Dante Disparte, head of policy and communications for the Libra
Association, told The Wall Street Journal that the organization
recognized that as libra is an emerging technology, "policy makers
must carefully consider how its applications fit into their
financial system policies."
"The Libra Association and its members are committed to working
with applicable regulatory authorities to achieve a safe,
transparent, and consumer-friendly implementation of the Libra
project," he said.
A Facebook spokesman said the company "will comply with
applicable financial laws and regulations, including
anti-money-laundering obligations". He played down competition
concerns, saying that Libra "will be an open platform," and that
the company welcomes competitors developing their own payment
systems.
Libra forms a major part of Facebook Chief Executive Mark
Zuckerberg's strategy of moving the company away from its reliance
on targeted advertising on public platforms.
However, amid the governmental backlash, companies that had
agreed to back libra are reconsidering their involvement. PayPal
Holdings Inc. is withdrawing from the coalition Facebook assembled
to launch the currency and The Wall Street Journal reported in
October that Visa Inc., Mastercard Inc., and other financial
partners were reconsidering their participation.
However, other companies remain committed, and on Tuesday,
British telecommunications company Vodafone Group PLC said it would
sign up.
Mr. Dombrovskis' plans for new regulation needs to be fleshed
out in coming months, and EU member countries, including France and
Germany, will have a considerable say. This would be the EU's first
regulatory step regarding digital currencies, although the
commission previously has warned about the risks to investors from
bitcoin's high price volatility.
In parallel, some central banks in Europe are exploring their
own version of digital currencies. Switzerland's central bank
announced Tuesday it was partnering with the Swiss stock exchange
to explore the tokenization of the Swiss franc, making digital
central bank money available for trading.
Peter Rudegeair and AnnaMaria Andriotis contributed to this
article.
Write to Valentina Pop at valentina.pop@wsj.com
(END) Dow Jones Newswires
October 08, 2019 09:45 ET (13:45 GMT)
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