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FRANKFURT - Facebook's proposed Libra currency could undermine the European Central Bank's ability to set monetary policy and Europe should ignore its siren call of "Treacherous promises" ECB board member Yves Mersch said on Monday.
Facebook announced Libra - a new digital coin backed by four official currencies and available to billions of social network users around the world - earlier this year, saying it hoped to launch next year.
"Depending on Libra's level of acceptance and on the referencing of the euro in its reserve basket, it 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," Mersch added.
Like regular currencies, Libra would be highly centralized, an "Extremely concerning" setup since it is not backed by a lender of last resort and it is ultimately accountable to shareholders, who are not seen as repositories of public trust, Mersch added.
Given these challenges, European regulatory and supervisory authorities need to assert jurisdiction over Libra and also need global cooperation to mitigate its risks.
"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 favor of the beguiling but treacherous promises of Facebook's siren call," Mersch added.
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As expected, Facebook has been pressured to reveal more details about its controversial digital currency Libra after a series of meetings with high-ranking central bank officials and governments which deemed Facebook’s new crypto venture as ‘vague’, pointing that it lacks important documentation.
According to European officials, Facebook’s cryptocurrency project poses serious threats to the economic sovereignty of powerful countries such as France and Germany and therefore it should be examined in detail, as cited by the French minister of finance Bruno Le Maire.
In a letter to German parliament member Fabio de Masi, Facebook describes that almost half of the Libra digital currency would be backed by US dollar reserves, while national and regional currencies such as the Euro, the British pound, the Japanese yen, and Singapore’s dollar would also provide support and stability.
In addition. Facebook says that backing Libra with traditional currencies is a key element to help solve the problem of price volatility, as seen in cryptocurrencies such as Bitcoin BTC, -2.11% and Ethereum ETH, -2.12%.
An important observation is that the Chinese yuan, the currency of the world’s second-largest economy, is absent from the list.
Whether it’s a Trump’s trade war-oriented strategy or the fact that China has already developed its own digital currency that will be backed by the local yuan, expected to be launched later this year, Facebook seems to ‘target’ national currencies before it’s even deployed.
Libra has no shortage of criticsEuropean Central Bank official Yves Mersch, who called Libra a ‘cartel-like’ operation during his speech at the ESCB Legal Conference earlier this Summer, says that Libra will be able to manipulate the pairing price with national currencies, and even shorten or pump the demand for a specific currency.
The Libra Association’s plan is to launch Libra sometime in 2020, despite the negativity received by the project from financial policy-makers and regulators all over the world.
Considering that the governing body behind Libra consists of telecom and tech giants such as Facebook, Mastercard, Visa, Paypal and others, it is not hard to imagine Libra catching on. Facebook alone reaches billions of active users across the globe.
Governments are naturally scared of a combination of forces of that magnitude, and therefore they see Libra as a threat to the current economic system.
On the other hand, Facebook keeps claiming that it welcomes feedback and discussion from global financial regulators, and are willing to address any concerns regarding the digital currency.
During a meeting that took place last week in Switzerland, Calibra head David Marcus tried to clarify the stance of the Libra project, stating that Libra it is not planning to be a new currency that will compete with existing currencies, but instead create a “better payment network and system running on top of existing currencies”.
Last week was full of various events for both participants of the cryptocurrency industry as well observers. Here are some expert comments on the current development of the digital asset market.submitted by bestchange_pr to bestchange [link] [comments]
On Monday Yves Mersch, Member of the Executive Board of the European Central Bank (ECB) criticized Facebook’s Libra.”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” . The official has also noted that Facebook’s cryptocoin will in fact be accountable to shareholders, raising trust issues, as it will not be backed by a central bank. Mersch called on regulators to take tight control over Facebook’s projects, and for users not to trust the tempting but questionable promises from the representatives of the American company.
Meanwhile, Jack Dorsey, the head of Square payment start-up and Twitter co-founder, continues to insist that cryprtocurrencies will continue to spread. The businessman believes in bitcoin, but he thinks that it is still too early to call it currency. In one of his latest interviews Dorsey notes, that bitcoin’s rises and falls in prices are more characteristic of a investment asset, such as gold. He hopes that as soon as the cryptocurrency becomes the currency of the Internet, his own start-up will pay more attention to services that create added value, rather than those that are engaged in money transfer
Mark Mobius, an investor in developing markets and Mobius Capital Partners founder said that gold-backed cryptocurrency can be an interesting phenomenon. The investor emphasized that there is a whole generation of people who have faith in the internet, and they have faith in cryptocurrencies.
“People believe in dollar because they have faith that with dollars in their hands they can buy something. Crypto enables people to buy something merely because they believe it has value”, Mobius said.
In the beginning of the week trader Peter Brandt tweeted that bitcoin has entered the fourth cycle of the parabolic uptrend that could lead it significantly past its all-time high price. The analyst is confident that the price of Bitcoin will reach one hundred thousand dollars in the long run. And although this bold prognosis does not yet have lots of supporters, one can’t ignore the fact that the price of the main cryptocoin is showing steady growth since Monday.
According to Coinmarketcap, by September,6, bitcoin rose in price up to $10 875, starting from the mark of $9 623 on the night of September,2.
VIENNA - European Central Bank governing council member Ewald Nowotny warned against accepting bitcoin as an official payment method, saying the digital currency lacked stability and was too vulnerable to speculation.
Many governments around the world are considering how to regulate and classify bitcoin BTC=BTSP, whose value surged in June to hit a record just shy of $3,000.
In April, the Japanese government recognized bitcoin as legal tender as part of efforts to use financial technology to stimulating the economy.
Bitcoin has fallen 20 percent since its record high in June but is still 245 percent over the past year.
Bitcoin can be traded on exchanges in the same manner as stocks and bonds.
The ECB is doing "Experimental work" with the same ledger technology that underpins bitcoin but it needs further research before considering adopting it, ECB executive board member Yves Mersch said in April.
Yves Mersch has said bitcoin could pose a threat to economic stability if financial infrastructure institutions get involved with the cryptocurrency. Yves Mersch, Direktoriumsmitglied der Europäischen Zentralbank EZB, warnt in dieser Woche vor den Auswirkungen des Bitcoin und anderer Kryptowährungen, sollten sich weiterhin etablierte Finanzinstitutionen in das Geschäft mit der volatilen Leit-Kryptowährung einschalten. Yves Mersch, Mitglied des Direktoriums der Europäischen Zentralbank (EZB), warnt vor der Bedrohung, die die Kryptowährung von Facebook mit Namen Libra für die Geldpolitik und die Verbraucher in der EU darstellt. Mersch kritisiert Kryptowährung von Facebook. Am Montag berichtete Reuters über die Haltung des Bankers. Mersch sagte gegenüber der Plattform: „Abhängig von der Akzeptanz der ... Am meisten treibe ihn indes um, wenn Finanzmarktinfrastrukturen wie Börsen in dieses Geschäft einsteigen, sagte Mersch: "Das birgt große Gefahren ... Yves Mersch: Money and private currencies - reflections on Libra Speech by Mr Yves Mersch, Member of the Executive Board of the European Central Bank, at the ESCB Legal Conference, Frankfurt am Main, 2 September 2019. * * * In 1787, during the debates on adopting the US Constitution, James Madison stated that “[t]he circulation of confidence is better than the circulation of money”. It’s ...
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