Regulatory

European Union unsure how to regulate Facebook’s Libra

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The EU cannot work out exactly what Libra is according to a memo by European Commission executive vice-president, Valdis Dombrovskis.

Dombrovskis refers to the “need to ensure clarity” about what Libra is, but that the information provided by Facebook is not sufficient.

Libra is described as a “moving target” that does not easily fall within existing EU law.

The memo goes on to restate the European Commission and Council’s intentions to move without delay to set up a regulatory framework that will facilitate harnessing the opportunities of crypto-assets.

The EU made it clear in December that no stable-coins would operate under its auspices until legal and regulatory issues were addressed.

This came a few weeks after Facebook founder Mark Zuckerberg appeared in front of US Congress to answer questions about the social media giant’s plans for the Libra project, where he acknowledged that his organisation is “not the ideal messenger” for a global stable coin.

The Federal Reserve also issued a warning to Facebook about the high regulatory standards it would need to meet before being able to launch.

Despite the universal cynicism that greeted Libra’s announcement, it has triggered a series of announcements from central banks, stating intentions to launch their own digital coins, including the People’s Bank of China, the European Central Bank and the Bank of Japan.

Former ECB board member, Benoît Cœuré, has described the Libra project as a “wake up call” for central banks to the threats to monetary policy and financial stability posed by digital currencies in the private sector.

The emergence of the memo comes as the association of German private banks calls for the creation of a “programmable account and crypto-based digital euro” that is interoperable with fiat.

The German private banks expect lawmakers and regulators to lay the necessary foundations for digital currency creation, especially in the banking sector, with strong data protection, consumer protection, and a single global identity standard baked in.  Anything else would ultimately lead to “chaos and instability”, they state.

Credits to: https://www.finextra.com

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