European Central Bank Executive Issues Warning on Facebook’s Libra, Calls It Treacherous

After announcing its native cryptocurrency Project Libra in June 2019, Facebook has faced massive pushback from regulators not only from its home-country but also from the global regulators.

Yves Mersch, a member of the European Central Bank’s executive board raised warning bells on the Libra cryptocurrency calling it “treacherous” and “cartel-like”.

Speaking at a legal conference of the European System of Central Banks in Frankfurt, Mersch said that Facebook cannot be trusted enough with their promises of decentralization of the Libra network.

Mersch believes that the corporate mega-partners which have joined Facebook as the node operators of the Libra network will have absolute monopoly on its working. "Libra will actually be highly centralized, with Facebook and its partners acting as quasi-sovereign issuers of currency," Mersch stated.

Drawing an analogy, Mersch said that if Libra is a wheel, Mark Zuckerberg will be the hub and the Libra partners will be the spokes. Mersch believes that the Libra Association will have a close-knit control over the Libra network.

"The Libra Association Council will take decisions on the Libra network's governance and on the Libra Reserve, which will consist of a basket of bank deposits and short-term government securities backing Libra coins” he said.

Further adding, Mersch believes that “Libra-based payment services will be managed by a fully owned subsidiary of Facebook, called Calibra. Finally, Libra coins will be exclusively distributed through a network of authorized resellers, centralizing control over public access to Libra."

 ECB's Yves Mersch says that Facebook holds a poor track record when it comes dealing with people’s private data. Thus, he notes that Facebook and its allies of the Libra Association shouldn’t be trusted for handling of confidential financial data. By stressing on this matter, he asks Europeans to stay vigilant in this matter.

He said: "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."

Facebook has hit a rough road when it comes to convincing regulators about the authenticity of its Project Libra.