Facebook’s Libra is a threat to national sovereignty
The company has shown economic and political ambitions with its plan for a digital currency
When 11 countries in Europe joined the euro in 1999, they freely relinquished their national currencies. They didn’t just say yes to a new currency as a medium of exchange; they consciously decided to transfer part of their sovereignty to the European level.
With its Libra plan for a global digital currency, Facebook has shown both economic and political ambitions. The project would mean a private company controlling a common good and taking over tasks normally discharged by states. This is unacceptable for both economic and political reasons.
Facebook’s 2.4bn users would give Libra instant worldwide reach. Its aim is to improve cross-border transactions that remain too slow and costly. In addition, Libra would be pegged to a basket of currencies and managed by a group of private companies. All this raises serious concerns.
Beyond well documented risks such as money laundering, terrorist financing and questions about data and consumer protection, Libra’s global ambition could trigger antitrust risks and undermine financial stability. The current legal framework is not ready to manage all these risks, nor would it protect the consumers using this currency.
Would a regulatory response be able to address all these risks? The answer is no, because Libra is asking states to share their monetary sovereignty with private companies. In fragile countries where many don’t have access to a bank account or a stable currency, people could simply stop using the national currency and turn to private currencies instead. Some countries may end up surrendering their monetary sovereignty and control over their economy.
Libra may also undermine monetary policy in developed countries. The decision of the private actors behind the project to change the quantity of a given currency in the basket may dramatically alter its value, without any public authority having a say.
Do we really want to give private interests such power, given the consequences it would have on trade and financial stability? I cannot countenance one of a sovereign state’s most powerful tools, monetary policy, falling under the remit of entities not subject to democratic control.
In the eurozone, the independence of the European Central Bank is guaranteed by the EU treaties. Members of the ECB executive board are selected by democratically elected governments at the European Council. The owners of Libra, on the other hand, won’t be accountable to governments, parliaments or even central bankers. This is unconscionable. The monetary sovereignty of states is underpinned by their citizens’ freedom of choice.
Does this mean we should reject any technological developments in financial services? Of course not. France has been advocating the opposite. President Emmanuel Macron has been pushing to establish a legal framework for new technologies, to help France become a leader in technological and financial innovation. We created an innovative legal framework for blockchain technologies. We should pursue these efforts and strive to find ways of meeting consumers’ reasonable expectations for modernised payment methods.
That is why I have invited my European partners and G7 members to consider two ways forward. First, we should develop innovative national and cross-border payment methods which are faster and less expensive. We expect banks and payment providers to deliver quickly. Second, we should consider the creation of central banks’ own digital currencies, in the medium to long term. We cannot let China be the only player in this field. Our independence is at stake. France’s position is clear: we want financial innovation to respect the sovereignty of states. Neither political nor monetary sovereignty can be shared with private interests.