This article was published on September 2, 2019

European Central Bank bigwig outlines why Facebook’s Libra isn’t real cryptocurrency

He also said Libra's ecosystem will be 'cartel-like'

European Central Bank bigwig outlines why Facebook’s Libra isn’t real cryptocurrency
David Canellis
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David Canellis

David is a tech journalist who loves old-school adventure games, techno and the Beastie Boys. He's currently on the finance beat. David is a tech journalist who loves old-school adventure games, techno and the Beastie Boys. He's currently on the finance beat.

A representative of the European Central Bank (ECB) has slammed Facebook’s quasi-cryptocurrency Libra, referring to its proposed ecosystem as a “siren call.”

Yves Mersch, Luxemborgian lawyer and ECB executive board member, even told attendees of the European System of Central Banks’ legal conference the Libra ecosystem will be “cartel-like.”

After prefacing his concerns with a history lesson on trust (which unimaginatively centered on the notion that the only “trustworthy” money is the sort backed by the state), Mersch actually painted a realistic picture of Facebook’s intention for its funny-money: centralized governance, centralized issuance, centralized control.

“To begin with, Libra coins will be issued by the Libra Association – a group of global players in the fields of payments, technology, ecommerce, and telecommunications,” said Mersch. “The Libra Association will control the Libra blockchain and collect the digital money equivalent of seignorage income on Libra.”

“The Libra Association Council will take decisions on the Libra network’s governance and on the Libra Reserve, which will consist of a basket of bank deposits and short-term government securities backing Libra coins. Libra-based payment services will be managed by a fully owned subsidiary of Facebook, called Calibra,” he added.

Even the ECB can tell Libra isn’t a real cryptocurrency

Mersch then (rightly) asserted that Libra ‘coins’ will be exclusively distributed through authorized resellers of Facebook’s choosing, which centralizes control over access to Libra  a supposed “global” cryptocurrency.

Ironically, this makes Libra entirely similar to public money (fiat), which is highly centralized. Quite literally, Facebook and its raft of blockchain buddies are set to act as “quasi-sovereign issuers of currency,” which certainly seems to openly shit on Satoshi Nakamoto‘s vision of a borderless and openly accessible digital currency immune to the control of any single entity.

Yet still, Facebook is keen to latch on to the “cryptocurrency” moniker for marketing purposes, a point directly highlighted by Mersch.

“With such a set-up, it is difficult to discern the foundational promises of decentralization and disintermediation normally associated with cryptocurrencies and other digital currencies,” he said.

… and then he shilled the Euro – SAD!

Mersch’s brutally honest evaluation of Libra is unfortunately tainted by a section in the middle of his speech, in which he unashamedly shills the Eurosystem’s new TARGET Instant Payment Settlement service, described as a “pan-European, 24/7 settlement service for instant payments.”

The ECB launched its new TARGET infrastructure last November. It promises to allow both companies and consumers to transfer money around the clock almost automatically, even on weekends.

It’s generally seen as the ECB’s response to PayPal, but it can only be used to send Euros, whereas PayPal supports 25 different world currencies.

Even stranger, the blatant advertisement for old-world monetary policy came directly after he claimed that, depending on Libra’s level of adoption, it could reduce the ECB’s control over the Euro.

He also noted a successful Libra could impair the ECB’s ability to provide liquidity to European banks, and even undermine the Euro altogether by reducing its demand. These are borderline reactionary claims that reek of fear-mongering.

Realistically, if Bitcoin hasn’t undermined the Euro, then it’s highly doubtful Facebook’s shitcoin will, either.

You can go ahead and read the full transcription of Mersch’s speech here.

Once you’ve read it, do yourself a favor: Replace every reference of Facebook and Libra to any of the thousands of shitcoins listed on CoinMarketCap (you know, those currencies that aren’t derived from a permissionless blockchain that utilizes Proof-of-Work).

Notice how Mersch’s concerns are still valid, even with the “cryptocurrencies” swapped out? Funny that.

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