Why is the French finance minister at war with Facebook's cryptocurrency?

Bruno Le Maire found a boxing bag: Libra, Facebook's blockchain currency project. Thursday, September 13, the French Finance Minister expressed his opposition to the development of digital money in Europe, saying that "our monetary sovereignty is at stake."

"It's a bit like Bruno The Mayor versus Balance Act II or Act III," said FRANCE 24. Loïc Sauce, economist and cryptocurrency expert at the Institute of Higher Education in Marketing and Commerce (ISTEC). This project since Facebook announced in June its plan to allow its two billion users to pay and send money with its new currency, Libra.

Protect the government domain

Initially circumspect, the Mayor became openly hostile to the project. In addition to the risk to sovereignty, he also referred to the "danger to consumers" and the "systemic risk" when he spoke of Libra.

"The reaction of the minister is understandable.The power to hit coins is traditionally the prerogative of the state.There is now a group of private companies (the Libra association – Among the non-profit organizations that will oversee the currency include companies such as MasterCard, Uber, Spotify and Vodaphone), claiming that their currency is more useful than those used in territories where Facebook is present, "said Michel Emmanuel de Thuy, digital director. at 99 Advisory, a management consulting firm specializing in the financial sector.

The Mayor has not hesitated to hit Facebook where it hurts. In raising the question of monetary sovereignty, the Mayor insinuates that, if she succeeded, Libra could interfere with monetary policies, de Thuy noted. If two billion people turn to Libra for part of their online transactions, "governments risk losing control of a significant portion of financial flows, which would deprive them of information essential to determination of monetary policy, "said Nathalie Janson, economist. bitcoin specialist at Neoma Business School.

For now, Facebook is only considering using Libra to allow users to transfer funds via its website or messaging services (WhatsApp, Messenger) and to pay online some of its merchant partners. "But as technological progress accelerates, some countries may be worried that this paperless currency may be used in the not-too-distant future to pay for everyday purchases, such as chopsticks," he said. Thuy.

Facebook's "too big to fail" & # 39;

In a world where Libra is established as a currency competing with the euro, the dollar or other currencies, Facebook would become de facto "too big to fail", just like banks that governments can not let go to go bankrupt, for fear of destabilizing all of their funds. savings. If Facebook's Mark Zuckerberg's empire collapsed, the money that users had in their virtual wallets Calibra – managed by Facebook – "would not be covered by a government guarantee, as this could be the case for bank accounts, and the losses could affect the entire economy.That is the systemic risk of which speaks Bruno Le Mayor, "explained Janson.

These worst-case scenarios remain hypothetical and Libra is still in the development stage. But the Mayor believes that prevention is better than cure. It is not the only one: US Senators have also expressed strong opposition to Facebook's monetary strategy during the hearing of David Marcus in July 2019.

But finding how to react is not easy. "Legislators could, at most, prohibit the payment of taxes in Libra and a court could sanction a contract that uses that currency as a means of payment," said Janson. The sauce competed. "Beyond that, the means of intervention of the state are very limited.If a US website, for example, decides to authorize payment in Libra, France can not Prohibit, "he said.

A public cryptocurrency to counter Libra?

Probably aware of these limitations, The Mayor seems to be in favor of creating a digital currency managed by central banks – a kind of public Bitcoin – in response to Libra. In an interview with the newspaper La Croix (and without ever mentioning Facebook's initiative), he explained that such a digital currency would have the advantage of making "transactions faster and cheaper" ( because the costs associated with cash management would be lower) and would facilitate access. financial services for "less bankable" populations. These are, almost word for word, the benefits cited by Facebook during the presentation of the Balance.

On 13 September, The Mayor made a joint statement with his German counterpart, Olaf Scholz, in which he urged the European Central Bank (ECB) to "accelerate its reflection on a public digital currency".

"This idea of ​​public virtual currency has been discussed by central banks for years, but has never been a priority.In a sense, it can be said that the threat of the arrival of Libra has made the debate on the modernization of the currency more urgent, "said de Thuy.

Such a currency would have the advantage on Facebook of "benefiting from the official guarantee of the central bank," said Janson. But all European governments should agree on its creation, first in principle, then on the details. In other words, Facebook may have the time to introduce its Libra and cash in before the ECB has an opportunity to come up with an alternative.

The battle between certain countries – including France – and Facebook for the future of the currency could have an unintentional victim: the pioneering spirit of cryptocurrencies. Libra and the public project proposed by Le Maire both call for systems controlled by a central body; whether it's the Libra Association in Geneva or the ECB. These projects are far from the ideal defended by Bitcoin promoters, who want to set up a system free of intermediaries, such as banks, and organizations at the top of the pyramid. Whether it is Libra or a public digital currency, this would defeat the revolutionary ambitions of the initial cryptocurrency movement, which aimed to establish a new system. financial, concluded Janson.

This article has been adapted from the original in French.