Ever since social media giant Facebook announced that it would launch its own crypto project, a host of national and international authorities have voiced their concerns. The latest is a high-ranking executive at the European Central Bank (ECB) who recently slammed Libra, describing its proposed ecosystem a ‘siren call.’ Libra will be controlled by an organized cartel of multinational firms and will not be a real crypto, the exec stated.
Luxembourg lawyer and ECB executive board member Yves Mersch called Facebook out on its crypto whose central governance will be its greatest impediment. Speaking at the European System of Central Banks’ legal conference, Mersch outlined why Libra can’t be trusted to be a global crypto.
To begin with, Libra coins will be issued by the Libra Association – a group of global players in the fields of payments, technology, ecommerce, and telecommunications. The Libra Association will control the Libra blockchain and collect the digital money equivalent of seignorage income on Libra.
Mersch then went on to outline how the Libra ecosystem will work, including the role of the fully-owned Facebook subsidiary Calibra and the arbitrage power of the Libra Association Council. He criticized the distribution model of the Libra currency, with Facebook having the sole and unchallenged authority to decide which companies get the currency for redistribution. All this while the company describes Libra as a global currency.
He added, “With such a set-up, it is difficult to discern the foundational promises of decentralization and disintermediation normally associated with cryptocurrencies and other digital currencies.”
Mersch also raised an issue that many other policy makers have also been vocal about: the trustworthiness of Facebook with sensitive financial data. He stated, “Conglomerates of corporate entities, on the other hand, are only accountable to their shareholders and members. They have privileged access to private data that they can abusively monetise. And they have complete control over the currency distribution network. They can hardly be seen as repositories of public trust or legitimate issuers of instruments with the attributes of ‘money.’”
Yet, for all his outstanding dissection of the challenges that plague the fake cryptocurrency that Libra is, Mersch still went on to undermine every other cryptocurrency as well. According to him, a currency can only “inspire trust and fulfil its key socioeconomic functions if it is backed by an independent but accountable public institution.”
“So the notion of stateless money is an aberration with no solid foundation in human experience,” he added.
Mersch is the latest to attack Libra, with U.S. lawmakers having criticized the currency repeatedly over the past few months. In August, the chair of the House Financial Services Committee in the U.S. Congress visited Switzerland to meet the regulators who’ll oversee Libra and upon return to the U.S., she stated that her anti-Libra stance hadn’t changed a bit.
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