It's not just central banks interrogating Facebook over its Libra cryptocurrency as of late. The Financial Times has learned
that the European Commission has asked Facebook to answer a range of
questions about Libra, including the risks to financial stability and
data privacy as well as the company's ability to comply with counter-terrorist financing and money laundering rules. Officials also want to know how Libra would handle its reserves.
The questioning is part of a larger EU effort to determine if and how
Libra should be regulated, provided it's even allowed to operate in the
region. There are significant hurdles to that happening. The European
Central Bank's Benoît Coeuré has warned that the standards for approval
"will be very high," and the French government has argued that Libra
shouldn't be allowed in the EU.
This doesn't mean Libra will be
rejected. Some European politicians argue the virtual money could be
useful for cross-border payments. However, regulators have been hoping
for a truly EU-wide agreement, since clearance in one EU country could
effectively make the currency viable across Europe.
The timing isn't certainly great for Facebook when Libra just lost backing from PayPal.
While Facebook isn't expected to run into more trouble with its
partners (they're expected to sign a membership declaration by October
7th), the combination of the departure with EU questioning is bound to
raise doubts about the viability of the digital monetary format.
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