Mixed reactions over Facebook’s Libra project..

Mixed reactions to the FB’s Libra project.

Mark Carney, Governor of Bank of England gives a cautious welcome:

Earlier this week, a cooperative of technology companies proposed a new payments infrastructure based on an international stablecoin – Libra. Libra would be backed by reserve assets in a basket of currencies including sterling. It could be exchanged between users on messaging platforms and with participating  retailers. As designed, Libra may substantially improve financial inclusion and dramatically lower the costs of domestic and cross border payments.15

The Bank of England approaches Libra with an open mind but not an open door. Unlike social media for which standards and regulations are being debated well after it has been adopted by billions of users, the terms of engagement for innovations such as Libra must be adopted in advance of any launch
Libra, if it achieves its ambitions, would be systemically important. As such it would have to meet the highest standards of prudential regulation and consumer protection. It must address issues ranging from anti-money laundering to data protection to operational resilience. Libra must also be a pro-competitive, open platform that new users can join on equal terms. In addition, authorities will need to consider carefully the implications of Libra for monetary and financial stability.

Our citizens deserve no less.

Leveraging our position at the heart of the international financial system and one of the world’s largest fintech hubs, the Bank of England will help lead the way on these issues at the G7, G20, the FSB, BIS and IMF.

Whatever the fate of Libra, its creation underscores the imperative of transforming payments. The Bank’s strategy to open access to a wide range of payment solutions combined with appropriate regulatory oversight of them maximises the likelihood that the payments revolution will meet the demands of the new economy and the needs of all our citizens.

Prof Katharina Pistor of Columbia Law School writes the project should be stopped by the Government.

After years of disregarding privacy, exploiting user data, and failing to control its platform, Facebook has now unveiled a cryptocurrency and payment system that could take down the entire global economy. Governments must intervene before a company that “moves fast and breaks things” ends up breaking everything.

This Bloomberg piece says central bankers will be keenly watching the project. It could lead to a new currency war:

It’s one thing for academics in Asia to rant against the tyranny of the dollar, or to make cheery forecasts about its impending eclipse by the Chinese yuan. But now that Facebook Inc. wants to spawn a new global currency – one that could meet the “daily financial needs of billions of people” and perhaps rival the greenback one day – central banks in Beijing, Jakarta, Manila or Mumbai won’t exactly be ecstatic.

To them, the prospect of being at the mercy of a cabal of tech czars and venture capitalists sitting in Switzerland could well mean swapping the yoke of the U.S. Federal Reserve for a less predictable and potentially more sinister dependence.

What if Facebook’s crypto, backed by fiat-currency assets and offering stable value, starts out by paying for coffee but over time becomes people’s preferred store of wealth? What will it mean for monetary sovereignty? Suppose users of Libra, as the currency will be called, manage to set aside their outsize privacy concerns with Facebook. Were the tokens to take off and – against all regulatory odds at home and abroad – gain global acceptance, there will be several implications for governments around the world.

Maxine Waters asks FB to stop the project given its track record:
“Given the company’s troubled past, I am requesting that Facebook agree to a moratorium on any movement forward on developing a crypto-currency until Congress and regulators have the opportunity to examine these issues and take action,” said Democratic congresswoman Maxine Waters.
Kenneth Rapoza of Forbes calls it a vampire project.
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