Germany Aims at Blocking Facebook’s Libra Along with Other Private Stablecoins
With the rapid advancement of blockchain-based technologies, stablecoins, a fast-growing subset of cryptocurrencies are also on the rise. Stablecoins are designed by pegging their value to some other asset, like fiat currencies or exchange-traded commodities, in order to avoid drastic fluctuations experienced by popular cryptocurrencies like Bitcoin and Ethereum.
Stablecoins, however, may not be as stable as their issuers advertise them to be. This rising class of digital money lacks access to short-term liquidity facilities which are common and convenient in traditional banking or other payment systems. Libra is one such major stablecoin from social media giant Facebook Inc., which is sternly poised to stir up the global financial industry next year.
Despite being a seemingly promising project, Facebook’s Libra has been at the epicenter of regulatory concerns for lawmakers all around the world. The most recent addition to the list of nations opposing digital money is Germany. Last Thursday witnessed the latest round of setbacks for Libra as Germany ramped up its rhetoric against the electronic currencies. The country’s Minister of Finance, Olaf Scholz, reportedly said that Berlin would reject any emergence of what he refers to as “a parallel currency.”
On the other hand, Wells Fargo announced that the German cabinet might develop and adopt its own comprehensive blockchain strategy to boost the digital transformation of its economy, besides being able to tackle the risks stemming from these new technologies. The American multinational financial services company also announced the development of its own “stablecoin”, which would be less volatile in nature and backed by traditional assets like a fiat currency. Their proposed cryptocurrency is also likely to join banks like JP Morgan to explore a product that would directly compete with Libra.
Germany’s backlash comes immediately following France’s move to halt the development of Facebook’s Libra in Europe, considering the fact that it threatens the “monetary sovereignty” of governments. Both the governments unanimously stated that “no private entity can claim monetary supremacy as it is inherent to the sovereignty of nations.”
However, creator of Libra, David Marcus, recently Tweeted defending the planned stablecoin. He argued that it’s impossible for Libra to pose any sort of sovereignty threats as it will not create any “new money.” As he explained, the digital currency will be backed 1:1 by a basket of strong currencies. This implies that for any unit of Libra to exist, there has to be the equivalent value of fiat in reserve.
Nevertheless, Libra forges on with Marcus’ announcement on Monday stating that the stablecoin will be launched in the second half of 2020, as originally planned.