Facebook once again defended its Libra cryptocurrency, this time in front of a group of central bankers at a conference on the regulation of stablecoins held in Switzerland on September 16.
The hearing was part of a day-long “Conference on Global Stablecoins” convened by the Committee on Payments and Market Infrastructures (CPMI) of the Bank for International Settlements (BIS), which provides banking services to central banks. It comes on the heels of harsh criticism of Facebook’s proposed Libra cryptocurrency last week, including French and German politicians promising to ban it in their countries.
“The bar for regulatory approval will be high,” warned Benoît Cœuré, the CPMI chair and a member of the European Central Bank’s executive committee, after the hearing.
“As a new technology, stablecoins are largely untested, especially on the scale required to run a global payment system,” he said in a brief statement that largely repeated comments he made the previous week. “They give rise to a number of serious risks related to public policy priorities.”
Along with Libra Association leaders, the hearing featured representatives of JPMorgan, which in February launched the JPM Coin, a private stablecoin. The third participant was Fnality, a consortium of major financial institutions planning to create a payment-focused stablecoin on a permissioned blockchain. Its members include UBS, Sumitomo Mitsui Banking Corporation, Nasdaq, Bank of New York Mellon, and State Street Corporation.
The conference also had a session focusing on how central bankers should respond to the growing stablecoin market, according to its official agenda.
While this included some practical discussions of how to use and manage stablecoins, such as providing faster payments and the cybersecurity required, the topics also included an existential question. That was, “[u]nder what conditions should global stablecoins be allowed to operate?”
That question was to be followed by another one discussing how to regulate these cryptocurrencies, which are backed one-to-one by a store of a national fiat currency or—as in Libra’s case—a basket of currencies.
Other issues discussed included the legality of stablecoins and regulatory matters including “anti-money laundering” (AML) and “countering the financing of terrorism” (CFT) rules. Data privacy and protection—which is proving to be Libra’s biggest hurdle—was also as topic, as were fair competition, market integrity, and tax compliance.
A spokesperson for the BIS declined to provide any other details about the meeting beyond its initial press release.
That included a conciliatory comment from the BIS general manager, Agustín Carstens. He said, “A key part of assessing new initiatives is to understand the details. When such initiatives cross national borders, it’s important for regulators to coordinate and come to a common understanding.”
Libra’s David Marcus takes to Twitter
Earlier that morning, Facebook’s Libra point man, David Marcus, launched a Twitter thread aimed at debunking the growing concern that Libra will threaten the sovereignty of nations by creating an alternate currency usable by Facebook’s 2.7 billion users.
Noting that Libra will simply be “a better payment network and system running on top of existing currencies,” Marcus said, “[a]s such there’s no new money creation, which will strictly remain the province of sovereign Nations.”
That comment of course led more than a few Twitter users to point out that central bank governors and elected officials are more worried about Libra’s ability to affect the global economy.
“Just because there isn’t new money creation does not mean you can’t threaten monetary sovereignty,” tweeted Eric Wall, who was once cryptocurrency and blockchain lead for Cinnober before that company was acquired by Nasdaq. “The Libra could enable a population in a country to abandon their native currency in favor of Libra (when the native currency isn’t even a part of the basket).”
As for that basket, Marcus also pointed—indirectly—to the Facebook trust issues undermining Libra.
He called for “strong regulatory oversight preventing the Libra Association from deviating from its full 1:1 backing commitment.”
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