Daily Management Review

Impact Of Facebook’s New Digital Currency Libra To Be Investigated By EU


Impact Of Facebook’s New Digital Currency Libra To Be Investigated By EU
There has been some degree of controversy surrounding the plans and announcement by Facebook that it would be launching its own crypto currency Libra. While there have been some who have supported the plans of the social media firm and argued that this move by the company would bring in great benefits all across the world, there have also been criticisms of the move – especially because of regulatory issues.
And in line with this criticism, the European Union’s Economic and Financial Committee (EFC) is set to initiate a further investigation of the issue and examine and weigh in the possible risks associated with the launch of the new crypto currency and about how this currency can be regulated in the future.
Each of the member states of the European Union would be sent the analysis note within the next few weeks. Then the various national governments would discuss the issues at the EFC meeting.  
One of the major issues that would be put up for discussion would be how to identify or designate Libra – as e-money or as a virtual currency or as a form of financial instrument. In case the authorities decide to classify the Libra as a digital asset, the currency would come under the regulatory control of the Markets in Financial Instruments Directive (MiFID II), the Anti-Money Laundering directives or another independent regulator.
Libra “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, for instance by reducing demand for it,” warned ECB’s executive member Yves Mersch.
“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.”
A number of major multinational corporations are backing the development and launch of Libra and it includes the likes of MasterCard and Uber.
According to reports, another of the issues that is set to come up for discussions is the impact Libra would have on sovereign currencies and the levels of volatility that this new digital currency would possess.
The supporters who have backed Libra have however tried to assure that the new digital currency would not be volatile and would be stable. However despite such assurances, there are concerns among regulators that the new crypto currency could result in global instability especially because this new method of digital payment can be accessed by a large number of people – given the fact that there are almost 2.4 billion users of Facebook – the largest social media platform of the world, globally. 
In addition to discussing these issues in its forthcoming meeting, the EFC also plans to come out with a final directive before Facebook officially launches Libra. According to the initial plans by the social media firm, the launch of Libra was scheduled for next year, which has now been postponed.