Yves Mersch of the European Central Bank (ECB), says that Libra can undermine the monetary policy of the European Central Bank.
Libra harmful to European economic instability
During a conference of the European Central Bank in Frankfurt, Yves Mersch, a member of the Executive Board, expressed his doubts about Facebook’s Libra. He discussed the risks of this crypto currency for European economic stability.
Mersch calls the project “tempting but insidious.” He thinks corporate currencies have little or no chance of succeeding as a reliable alternative to fiat currencies (such as the euro and the dollar). His arguments focus on the infrastructure that Libra, the Libra Association supports, and on Facebook’s reputation.
Libra Foundation is a cartel
During his speech, he pointed out that Libra comes from the same people who had to defend themselves against the United States and the European Union. Facebook had to defend itself in response to a leak of personal data, which, according to Mersch, is a threat to our democracy. A clear reference to Cambridge Analytica.
Another concern that Mersch brought up is the structure of the Libra Association. He calls this a cartel of large companies in the field of payments, technology and telecommunications.
As a result, Libra has none of the characteristic features of cryptocurrencys. It is not decentralized, it is neither public nor boundless, nor censorship-proof or neutral. It is a real attempt by large companies to play the role of central banks.
Trust only a central bank
Mersch admits that fiat currencies are also centralized, but unlike Libra, they have a sovereign entity and a central issuing authority. His doubts are therefore primarily focused on the reliability of the companies that have to manage the project. According to Mersch, there is no guarantee that these companies act in the interests of consumers, also because they have access to private data that can be misused.
He says that only an independent central bank has consumer confidence because only a central bank makes a currency reliable.
In his speech, he addressed all European citizens not to be seduced by projects such as Libra. He also hopes that citizens will not let go of the security and reliability of established payment solutions and fiat currencies. During his speech, Mersch repeatedly emphasizes that consumers do not trust private companies to create a sound monetary system.
However, the ECB does not completely close itself to crypto.
The attitude of central banks towards modern forms of money will evolve over time. Central bankers have embraced technological developments in the field of money and will continue to explore useful new innovations.
An important question is, does Mersch really think it is in the interest of European consumers? Or is this a shock reaction because the monopoly on money creation can sometimes be taken out of your hands?