Just when Mark Zuckerberg and his executive team had thought that the nasty news about Facebook and its Project Libra had died down a notch, out comes Yves Mersch, executive board member at the European Central Bank (ECB), with a blistering attack that opened up old festering wounds. “Treacherous promises”, and “Cartel-like behavior” are not the type of words you want to read in one article after another in the morning newspapers and on online media channels. Perhaps, Mersch had been on an extended holiday and missed all of the fun, but he certainly made up for it, even if delayed.
As central bankers often do, Mersch was on the speaking engagement trail, when reporters from Reuters tracked him down. He delivered his “blistering takedown”, as one reporter described it, on Monday at a scheduled conference of the European System of Central Banks in Frankfurt, Germany. His first salvo laid the groundwork for what was to follow:
[Libra] could reduce the ECB’s control over the euro, impair the monetary policy transmission mechanism by affecting the liquidity position of euro area banks, and undermine the single currency’s international role.
Mersch then took issue with several of what he called “cartel-like, treacherous promises” from the likes of Facebook’s Libra cryptocurrency. He first took issue with its centralized nature, something diametrically opposed to what crytocurrencies have professed to be. He admonished Facebook’s mega-partners of being nothing more than “quasi-sovereign issuers of currency.”
Yves Mersch is not the first critic to voice such concerns. CCN had previously reported that Attorney Mark Grabowski, a professor at Adelphi University who specializes in Internet law and monitors bitcoin, had quipped:
How could Libra not be centralized? Facebook is not backing this project because they are benevolent believers in decentralization. In fact, true decentralization threatens their network. Look at the way Libra is structured. It’s a complete contradiction to decentralization. Facebook can use all the crypto buzzwords they want, but it’s like putting lipstick on a pig.
It seems that every aspect of Libra is questionable from Mersch’s perspective. He disapproves of the stablecoin based on a basket of currencies, the distribution of the coins through a network of unregulated but authorized resellers, and the governance of its vast reserve fund. All issues beg for trust, when Facebook has already proven its lack of trustworthiness, when handling private and personal information of its customers. He also challenged international regulators to act quickly before Libra’s 2020 launch date.
Lastly, at the end of his tirade, Mersch appealed to all Europeans to ignore the Trojan Horse in their midst:
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.
Mersch has joined Benoit Coeure, a fellow ECB member, who had claimed in early July, as reported by Coindesk, that Facebook’s plans were a “useful wake-up call for regulators and public authorities”. He went on to add at the time:
It’s out of the question to allow them to develop in a regulatory void for their financial service activities, because it’s just too dangerous. We have to move more quickly than we’ve been able to do up until now.