Facbook’s Libra being supported by a US-based company, Europe might now feel a stronger need to push for its very own cryptocurrency. In the past, the European Central Bank has also shown its intention of launching a native public digital currency of its own. With such statements pouring in, it is strongly implied that it will be very hard for Libra to find its niche.
Since Facebook has stepped into the world of blockchain and cryptocurrencies, it plans to launch its own digital currency Libra, as early as next year. As of yet, the road for Libra has not been smooth even though it is not a pure cryptocurrency in its true sense, it will have its ties with fiat currencies with the likes of U.S. dollar, Euro, etc.
While Libra is still struggling to pass the regulatory hurdles in the U.S., it is now expected to struggle even more, since some “not so friendly” statements have come out of the eurozone.
In a joint statement issued at a meeting of eurozone in Helsinki, France’s finance minister, Bruno Le Maire and Germany’s counterpart, Olaf Scholz said;
Virtual currencies pose risks to consumers, financial stability and even “the monetary sovereignty” of European states,
as reported by Reuters.
Libra is expected to have pegs with not just the USD, but also with the euro, pound, and some others. This multitude of currencies will help Facebook to develop a greater global dominance. With various parties remaining skeptic of it and showing a hostile attitude, Libra might just not get the adoption it desires.
France and Germany consider that the Libra project, as set out in Facebook’s blueprint, fails to convince that those risks will be properly addressed,
Facebook-led Libra association head recently responded to such claims that Libra is going to affect financial stability through its reserve of currencies and government bonds that might push central banks to change their monetary policies. In an interview with French daily Les Echos on Thursday, Bertrand Perez, the association’s managing director, and the chief operating officer said:
It is their monetary policies that will influence the Libra through the basket and not the other way around.
According to Perez, the reserve is going to hold currencies that will amount to “probably no more than $200 billion,”. This amount is very less significant in the global financial market from a holistic point of view. As Perez said, “We are not going to become a new BlackRock,” which has around $6.84 trillion assets under management.
Still, clarification will not suppress the desire of developing “something of its own” in the euro zone with European Central Bank carrying the power. Overall, the developments of such semi-cryptocurrencies that will have back-channel links with the fiat world will bring all the issues of the traditional world into the digital currency space.
Cryptocurrencies that are considered true to their core such as bitcoin, do not have any such link with fiats. They have totally different economic models and the emergence of fiat-backed digital currencies might just kill the innovation that cryptocurrencies are bringing. But for the time being, even Libra has much to overcome with the possibility of a “eurocoin” coming head-to-head with it.