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Ten reasons why Facebook’s Libra is a bad idea – and we should stop it now

FinTech

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Finance Watch

Charlotte Geiger

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Brussels, 23 July 2019 – Public interest organisation Finance Watch released today a highly sceptical initial assessment of plans to create a new global stablecoin, Libra. The plans, by a consortium of private companies led by Facebook, give rise to serious risks for would-be Libra users, for the stability of our financial system, and for democracies.

While Finance Watch is open to technological progress in this area, we have identified several specific concerns with the Libra proposal based on an initial analysis of the Libra White Paper:

  • Libra users could lack data and consumer protection: Libra could increase the inappropriate use of data and digital profiling to the disadvantage of citizens; in addition, Libra users could lose money if the consortium were to stop backing Libra in a global crisis.
  • Libra could pose risks to financial stability: Libra could increase systemic risk in financial markets, it could exacerbate a global financial crisis, and be the subject of intense speculative trading.
  • Libra could threaten democratic systems: By design, Libra would further concentrate power in the hands of digital oligopolists, it might become a channel for “dirty money” and a private “fiat” currency without any public scrutiny or democratic accountability.

Benoît Lallemand, Secretary General of Finance Watch, said:

“Having already infiltrated our private lives with its social media business model, the tech group is now preparing together with other private companies to take control over another crucial area: money. Libra could destabilise our financial system and concentrate power in unaccountable hands – a dangerous experiment at citizens’ expense.

“As long as our concerns are not convincingly addressed by national, regional and global regulation – supervised through effective global governance mechanisms – we demand policymakers to immediately stop the introduction of Libra.”

While Finance Watch welcomes similar warnings from the G7 working group on stablecoins and a significant number of regulators and policymakers around the world, the time needed to adequately address issues linked to the introduction of Libra at a global level does not seem compatible with the timeline given by the Libra consortium.

That is why Finance Watch launches today, together with its German partner organisation Finanzwende – Finance Watch Germany, a citizens’ petition entitled “No Libra – Stop Facebook Money. The petition demands that key EU policymakers – the President-elect of the European Commission, Ursula von der Leyen, the current President of the European Central Bank, Mario Draghi, and from his successor-candidate, Christine Lagarde – take regulatory measures immediately to stop Libra for the time being. This follows a call this month by the US House of Representatives Committee on Financial Services for a moratorium on the introduction of Libra.

Finanzwende also published today the results of a poll that they commissioned with YouGov indicating that more than 71 percent of German citizens have serious concerns with Libra.

 

ENDS

For further information or interview requests, please contact:

Charlotte Geiger, Senior Communications Officer at Finance Watch, at charlotte.geiger@finance-watch.org or at 0032/(0)474331031.

 

NOTES FOR EDITORS

On 18 June 2019, social media giant Facebook unveiled plans to create a stablecoin to be called Libra, and an associated payment system, outlined in its Libra White Paper. The target launch of Libra is foreseen in the first half of 2020.

On 2 July 2019, The United States House of Representatives Committee on Financial Services requested Facebook and its partners to stop the development of the Libra stablecoin in a letter.

On 18 July 2019, the G7 working group on stablecoins has published a first statement on Libra and its serious risks related to public policy priorities.

Until today, no European policymaker or regulator has proposed concrete regulatory measures to limit the potential risks from the introduction of Libra in Europe.

 

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