Libra's Cryptocurrency to Undercut the ECB's Powers?

The widespread adoption of Facebook's Libra cryptocurrency may undermine the ability of the European Central Bank (ECB) to determine monetary policy, a potential risk for the currency bloc. This was stated today by ECB board member Yves Mersch, quoted by Reuters.

"Depending on Libra's level of acceptance and on the referencing of the euro in its reserve basket, it 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, for instance by reducing demand for it," Mersch added.

Facebook officially unveiled its digital currency this June. It is expected to be launched in 2020. The new technology threatens to change the landscape of the banking sector. The world's largest social network is already under scrutiny and faces increasing calls for regulation and antitrust measures. One of the main questions is how soon a person will be able to use digital coins on the social network to buy coffee, for example.

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