Despite ongoing probes into the company’s handling of users’ personal data, which allegedly led to manipulation during some votes in Western countries, Facebook has announced plans to introduce its own virtual currency, the Libra, backed by four real ones in 2020.
Member of the Board of the European Central Bank (ECB) Yves Mersch has cautioned that the virtual Libra currency that has been proposed by Facebook could under certain circumstances negatively affect the bank’s ability to regulate the Euro and the single market.
“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”, he said.
Mersch further expressed concern over how the new currency will be regulated, pointing out that it lacks “a lender of last resort” and is basically controlled by a group of shareholders who can’t be regarded as “repositories of public trust”. The ECB board member also pointed out that the company behind the planned virtual currency, Facebook, is currently subject to scrutiny by legislative bodies both in the US and in the EU over its mishandling of users’ personal data, something which has allegedly posed “threat” to Western democracies.
The ECB official said that he hopes European users won’t be “tempted” by the “treacherous promises of Facebook’s siren call”, but would instead stick with the “safety and soundness of established payment solutions”.
Facebook announced in 2019 that its virtual cryptocurrency, the Libra, would be launched in early 2020 as a means to give access to “basic financial services” to those users who currently lack them in their own countries. The currency, which would be run by Facebook along with 28 partners, including Visa, MasterCard, PayPal, Uber, Lyft, and Spotify, is expected to be used for money transfers, as well as purchases.
However, the company’s initiative has been met with criticism in the US, with the Congressional House Financial Services Committee reportedly drafting a bill called the “Keep Big Tech Out Of Finance Act” to prevent technological giants from becoming financial service brokers. The US Congress also suspects Facebook of mishandling its users’ private data, which has allegedly been used to manipulate elections in the country. The company is facing similar scrutiny in several European nations.