Will the EU Compete with Libra or Regulate it?

Europe’s concerns over Facebook’s planned stablecoin Libra continue, but it’s what actions the EU will eventually take that’s open for debate.

Reuters reporting on November 5, revealed that the EU could be seriously considering launching its own public digital currency. But, reporting a day later by CoinDesk, citing sources in the know, points to the EU looking instead to regulate cryptocurrencies.

An EU draft document, obtained by Reuters, suggests the European Central Bank (ECB) may be thinking about issuing its own digital currency. The report also says a common approach to cryptocurrencies is needed with the possibility of banning high-risk projects.

The draft was prepared by the Finnish EU presidency, as per Reuters, and may be adopted formally by European finance ministers during their next meeting on December 5. It could be amended beforehand and could also trigger formal EU regulation on cryptocurrencies. It says:

“The ECB and other EU central banks could usefully explore the opportunities as well as challenges of issuing central bank digital currencies, including by considering concrete steps to this effect.”

Both France and Germany have openly expressed concerns over Libra’s risks to financial markets and systems and support the development of a public, European, alternative. Benoit Coeure, an ECB board member, said in September that the central bank should “step up” its thinking towards this goal.

After the draft’s revelation, an unnamed source reportedly told CoinDesk that the EU is not being urged to a develop cryptocurrency of its own. The source said:

“This is a rather short declaration that is about the EU position on how to handle those new types of cryptocurrencies.”

And, the source said, “the focus is on how those cryptocurrencies should be regulated.”

The CoinDesk source confirmed they were unaware of what any declaration’s final contents might be but also said “there’s absolutely no commitment at this stage to put in place a new cryptocurrency,” adding:

“The statement is to highlight the need for a proper regulatory framework for those stablecoins, and as a consequence, different ideas should be explored. One of them is the possibility of having something that is managed by the ECB [European Central Bank] and other central banks.”

The draft document now looks set to be finalised on November 8 before being presented to EU finance ministers and then culminating in the final declaration on December 5.

A technical analysis and comprehensive update on Facebook’s Libra project can be found here.