By Steve Goldstein, MarketWatch
A high-ranking European Central Bank official on Monday outlined problems with the planned cryptocurrency Libra, the latest in a series of warnings from government officials.
“I sincerely hope that the people of Europe will not be tempted to leave behind the safety and soundness of established payment solutions and channels in favor of the beguiling but treacherous promises of Facebook’s siren call,” said Yves Mersch, a member of the ECB’s executive board.
In a speech at a Frankfurt legal conference, he wryly noted that Libra was coming from “the very same people who had to explain themselves in front of legislators in the United States and the European Union on the threats to our democracies resulting from their handling of personal data on their social media platform,” a reference to Facebook /zigman2/quotes/205064656/composite FB -0.16% .
One concern Mersch raised is that the Libra coins will be issued by a cartel of players in the fields of payments, technology, e-commerce and telecommunications. Called the Libra Association, it will control the blockchain and collect the seigniorage income. Libra Association members include Mastercard /zigman2/quotes/207581792/composite MA -0.47% , PayPal /zigman2/quotes/208054269/composite PYPL +4.18% , eBay /zigman2/quotes/204653455/composite EBAY +3.34% and Uber /zigman2/quotes/211348248/composite UBER +6.35% .
“With such a setup, it is difficult to discern the foundational promises of decentralization and disintermediation normally associated with cryptocurrencies and other digital currencies. On the contrary, similarly to public money, Libra will actually be highly centralized, with Facebook and its partners acting as quasi-sovereign issuers of currency,” he said.
Public money also is centralized, but unlike Libra, has a “sovereign entity and a central issuance authority.” The corporate entities, by contrast, are accountable to their shareholders and will “get privileged access to private data that they can abusively monetize.”
Libra also lacks a global lender of last resort and is devoid of the equivalent of a depository guarantee scheme, he said.
Libra has faced a mostly hostile reception from regulators and politicians, including U.S. Treasury Secretary Steven Mnuchin and President Donald Trump. However, Bank of England Gov. Mark Carney envisioned Libra as a possible alternative to the U.S. dollar as a reserve currency.
Facebook is planning on a 2020 launch for Libra.