In June 2019, Facebook announced plans to develop Libra, a blockchain-based cryptocurrency, and introduce its new digital and decentralised so-called ‘stablecoin’ to the global economy in 2020. A ‘stablecoin’ is a cryptocurrency designed to minimize the volatility of its price, through its backing by a financial asset and/or reserve.
Since its June announcement, policy makers and regulators around the world have been debating both, the operational opportunities and regulatory challenges of the project. Financial regulators, particularly in Europe, are concerned at the potential risk that any decentralised, unregulated currency may pose to the financial viability of not just the single currency, but Europe’s economy at large.
At their meeting on Friday, EU Finance Ministers discussed global developments in developing and introducing such digital stablecoins. According to a draft statement by the Finish Presidency of the Council of EU, Ministers recognise that stablecoins may ‘present opportunities in terms of cheap and fast payments, especially cross-border’, they however ‘pose multifaceted challenges and risks related for example to consumer protection, privacy, taxation, cyber security and operational resilience, money laundering, terrorism financing, market integrity, governance and legal certainty’.
In light of the considerable challenges set out above, Finance Ministers underlined their strong opposition and vowed to block any such projects entering into operation in the European Union until all of the risks had been appropriately addressed. They added that once such initiatives reached a global scale, these concerns would likely be amplified and new potential risks to monetary sovereignty, monetary policy, the safety and efficiency of payment systems, financial stability, and fair competition could arise.
Minister’s strong opposition to an independent, decentralised digital currency undermining the monetary sovereignty of the eurozone, continues the ongoing clash between rapid technological advances in international financial markets and European focus on regulation, consumer protection and ensuring legal certainty. In this context, the European Commission, in 2018 published an extensive FinTech Action Plan setting out the various opportunities and challenges technological developments in the areas of finance, insurance and cloud computing.