Libra never really caught the imagination of regulators and central bankers when it was first announced. However, it took those who stood against it a while to find a real point of objection. Now, Central Bankers from across the G7 are arguing that it is a threat to National Currency Sovereignty.
They believe that a private entity, like Facebook, creating a digital asset that is pegged to a basket of national currencies, basically indicates the creation of a new monetary system. Effectively, taking power and process away from the central banks, whose job it is to make new monetary systems.
On face value, their point can be seen. However, their backlash seems to be a little too personal, even a little over the top, as well as a front for ulterior motives. France, for instance, while slating Libra and blocking its development in Europe, also said in the same breath that a “Euro Coin” cryptocurrency would be a good idea.
Germany, who recently put out a strategy to also block Libra, mentioned that it would discuss Blockchain-based bonds. So, clearly the banks are not anti-blockchain or cryptocurrency, they are anti not being in control.
However, one then has to wonder what their viewpoint on private banks creating stablecoins is? JPMorgan is using its JPMorgan coin for cross border internal settlement with Wells Fargo also joining this party. So, although they are keeping internal for now, what if they take it to the public? Will the central bankers slam brakes again?
In all honesty, it feels as if the issue is with Facebook itself. Many in the cryptocurrency space didn’t like the idea of Facebook to be the ones who brought crypto to the masses, but they appreciated the ambitious plan. However, the regulators look as if they are holding a grudge.
In fact, it is the US regulators who are being brazen about their dislike of Facebook in control of a whole new currency; part of the Senate hearing argued that Facebook couldn’t be trusted with data, how can it be trusted with finances.
Yet, if the reason for this anti-Libra sentiment is the threat to National Currency Sovereignty, are they right, or justified. David Marcus, the man at the helm of al this, took to Twitter to try and dispel these concerns.
“About monetary sovereignty of Nations vs. Libra,” he tweeted “Recently there’s been a lot of talk about how Libra could threaten the sovereignty of Nations when it comes to money. I wanted to take the opportunity to debunk that notion.”
“Libra is designed to be a better payment network and system running on top of existing currencies, and delivering meaningful value to consumers all around the world.”
“Libra will be backed 1:1 by a basket of strong currencies. This means that for any unit of Libra to exist, there must be the equivalent value in its reserve. As such, there’s no new money creation, which will strictly remain the province of sovereign Nations.”
“We also believe strong regulatory oversight preventing the Libra Association from deviating from its full 1:1 backing commitment is desirable. We will continue to engage with Central Banks, Regulators, and lawmakers to ensure we address their concerns through Libra’s design and operations.”
What Marcus is promising is what Tether promised. However, in Tether’s case, they turned out to be lying, and they indeed did create a new supply of currency – but the central bankers have not stamped down on them.
Indeed, any new cryptocurrency that is created is essentially bringing into existence a new monetary supply and should catch the ire of the central bankers. What Libra is doing is probably the lowest threat to national currency sovereignty.