In November 2019, the European Member of Parliament for Malta wrote a letter to the European Commission seeking clarification on Facebook Libra. According to the letter sent by Roberta Metsola, he wanted to know the legal standing of Libra. It is important to note that Metsola was not part of the 23-person group that wanted Libra banned in the EU.
Response by the EU
The Executive VP of the European Commission wrote a response to Metsola. In his response, the VP said that before Libra was allowed in the EU, there would need to be legal clarity. He added that currently, there was no legal clarity around Libra. However, the EU does not intend to ban Libra. Instead, it is going to create regulation after far-reaching public consultations.
He added that the commission had already sent questions to Libra. The responses they get will be used to formulate the legislation that will regulate Libra. The VP noted that Libra was a moving and evolving target. As a result, the EC did not have enough detail to formulate a legal status for Libra.
Rumors Surrounding Libra
Some of the latest rumors claim that instead of using a basket of currencies, Libra will utilize the USD. The European Commission noted that the risks stablecoins pose would need to be remedied with the right regulatory oversight.
Stablecoins are Crypto
In his response, the VP clarified that the European Commission considered stablecoins to be a crypto-asset subset. This is a term used by the Bank of International Settlements when talking about digital assets and not just cryptocurrencies. In December 2019, the EC began holding public consultations for crypto assets. These consultations will continue until March 2020.
Facebook Libra Ban
The VP took the opportunity to respond to a letter sent by 23 members of the European Parliament. They raised concerns about Libra. In their letter, they claimed Libra could make illegal actions such as money laundering easier. Additionally, they viewed it as a threat to central banks in Europe. The members wanted to know if the EC would ban Libra or regulate it.
The VP noted that money laundering was already addressed by existing EU laws when it comes to virtual currencies. There was currently a January 10 deadline for all EU member states to implement this law. The law has led to 40 banks in Germany expressing a willingness to become custodians of digital assets.
The EC EVP noted that if the EU wished to remain competitive internationally, it had to embrace technology. This includes technology developed for the financial sector. He said the digital currencies presented the opportunity to create a cheap and efficient payment system. The VP noted that while they offered major benefits, it was also crucial to consider the risks. When considering these risks, the EU should differentiate the risks caused by small stablecoins and global stablecoins such as Libra.
Moving Forward
The EU appears to be considering allowing Libra in its jurisdiction. However, some nations have said that they will not allow the Libra in their economies. It is interesting to watch how it all plays out. There hasn’t been too much news surfacing around Libra as of late. It seems like the hype has sold-off a bit. As time progresses, it will be interesting to see if this is stemming from positive or negative reasons. A positive thought is that Facebook is quietly working hard on the backend to fulfill regulatory demands. On the flip side, the silence around Libra could be a sign that Facebook is taking a step back until overall clarity is addressed in the cryptocurrency atmosphere.
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