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Europe should ignore 'treacherous promises' of Libra: ECB's Mersch

ECB board member Yves Mersch highlights Facebook's litany of personal data sins

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Mr Mersch said that if left unchecked, Libra could reduce the ECB's control over the euro, impair the monetary policy transmission mechanism and undermine the single currency's global role.

Frankfurt

FACEBOOK'S proposed Libra currency could undermine the European Central Bank's ability to set monetary policy and Europe should ignore its siren call of "treacherous promises" ECB board member Yves Mersch said on Monday.

Facebook announced Libra - a new digital coin backed by four official currencies and available to billions of social network users around the world - earlier this year, saying it hoped to launch next year.

"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," he said.

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Like regular currencies, Libra would be highly centralised, an "extremely concerning" setup since it is not backed by a lender of last resort and is ultimately accountable to shareholders, who are not seen as repositories of public trust, Mr Mersch added. "It is scheduled for release in the first half of 2020. This is 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 democracies resulting from their handling of personal data," Mr Mersch added.

Given these challenges, European regulatory and supervisory authorities need to assert jurisdiction over Libra and also need global cooperation to mitigate its risks. "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," Mr Mersch added. REUTERS