Zuckerberg's 'shadow bank': Pushback against Facebook's new cryptocurrency has already begun

Isobel Asher Hamilton

• Facebook announced the launch of its new cryptocurrency, Libra, on Tuesday. But critics already have their doubts. 

• France's finance minister was among the first to voice his misgivings over Libra, saying it must not be allowed to become a "sovereign currency."

• He has asked the governors of the G7 central banks to prepare a report on Libra for mid-July.

• Politicians in Germany and Italy also voiced concern, with one saying Facebook could become a "shadow bank."

Within hours of Facebook announcing its new cryptocurrency Libra, lawmakers in Europe were raising the alarm.

France's finance minister Bruno le Maire told radio station Europe 1 on Tuesday that he had no problem with Facebook building a payment system, but the idea of Libra becoming a "sovereign currency" is "out of the question."

Facebook has presented Libra as an online currency, but Facebook's VP of blockchain product Kevin Weil told Business Insider that it could evolve and move into more sophisticated financial products like credit. 

Le Maire added that he would need reassurances that such a payment system couldn't be used for nefarious purposes, for example, to finance terrorism.

His misgivings are strong enough that he has asked the governors of the G7 central banks to produce a report for mid-July laying out the risks posed by the new currency.

Read more: Here's what Facebook's new cryptocurrency Libra will look like and how it will work

Le Maire also said that the new cryptocurrency could allow Facebook to hoover up even more data about users than it already does. Facebook has said that the financial data generated by Calibra — the subsidiary it has set up to manage Libra — will not be shared with Facebook or used to target ads at users.

Meanwhile, German member of the European Parliament Markus Ferber said the new currency could turn Facebook into a "shadow bank" which should, "set off alarm bells for regulators." Italian politician Francesco Boccia similarly voiced concern, tweeting that Libra would join the existing cryptocurrencies "without regulation."

While Facebook has presented Libra as well shored up, with 27 companies including Mastercard, Uber, and Andreessen Horowitz ranking among the "founding members," regulatory scrutiny still has the potential to sour things for Facebook.

Mastercard's executive vice president for digital solutions Jorn Lambert told Reuters that if the project experiences too much regulatory pushback "we might not launch."

 

Compiled by Olalekan Adeleye

Business Insider

Rate this item
(0 votes)