Facebook will be quizzed by global regulators on its planned Libra coin project amid concerns from EU governments over the threat the digital currency poses to financial stability. Representatives of Libra will meet officials from 26 central banks, including the Federal Reserve and the Bank of England, in Basel on Monday in the first major encounter between Libra’s founders and policymakers since Facebook unveiled its plans to upend global payments, officials told the FT. Benoît Coeuré, of the European Central Bank who will chair the meeting, has warned “the bar for regulatory approval will be very high” for Libra to operate in the EU.
He was speaking after a gathering of EU finance ministers in Helsinki where governments expressed “strong concerns” about how Libra and other digital currency technologies could destabilise the financial system and undermine the sovereignty of governments and central banks. Mr Coeuré will chair the meeting between Libra and the Committee on Payments and Market Infrastructure, a forum that is part of the Bank of International Settlements, on Monday. Libra’s founders have been invited to answer key questions about the currency’s scope and design with the findings feeding into a report for G7 finance ministers in October, said an official.
Libra said the founders welcomed all talks with regulators. “In the nearly three months since the intent to launch the Libra network was announced, we have prioritised engagement with regulators and policymakers around the world,” Libra said. “We welcome this engagement and have deliberately designed a long launch runway to have these conversations, educate stakeholders and incorporate their feedback in our design. The BIS declined to comment. Facebook’s digital currency initiative has drawn the immediate attention of governments and central banks. Bruno Le Maire, French finance minister, has said Libra should be blocked from operating in the EU as it risked undermining the “monetary sovereignty” of governments in the absence of proper regulation. “Under the current conditions, we should refuse the development of Libra in the EU”, said Mr Le Maire. France holds the rotating presidency of the G7, which quickly assembled a dedicated group to scrutinise Libra and other so-called stable coins which is also chaired by Mr Coeuré.
The Financial Stability Board, another Basel-based group that makes recommendations to the G20 and is chaired by a deputy governor of the US Federal Reserve, Randal Quarles, has also said it will study Facebook’s plans. Regulators and governments have been scrambling for more information on the scope and design of Libra since the project was announced in June. The European Commission’s antitrust authorities have sent out a questionnaire to the company as part of a preliminary investigation to explore whether the currency unfairly disadvantage rivals. Brussels is also in the early stages of designing a framework to regulate Libra and other stable coin currencies that are designed to be backed by hard assets and currency baskets. Valdis Dombrovskis, EU vice-president in charge of financial services, said there is a “strong willingness to act at the EU level”. “There are certain concerns about the financial stability implications.
The risks need to be fully understood and the EU needs to act in a unified way”, said Mr Dombrovskis. European policymakers are particularly concerned that Libra will prove popular in the EU where consumers still face difficulties in making cross-border payments. Mr Coeuré on Friday said the project was a “wake-up call” for governments and central banks which needed to work on technologies to make consumer payments “faster and cheaper”. Global central banks have also touted the possibility of developing a rival digital currency to undermine private initiatives from tech giants such as Facebook. Mark Carney, governor of the BoE, and Christine Lagarde, incoming president of the ECB, have supported central banks coming up with their own digital currencies. Mr Coeuré said it was time for regulators to “step up our thinking on a central bank digital currency”.