As Pushback Grows in Europe Against Facebook’s Libra, Walmart Considers its own Cryptocurrency
A few weeks ago we
wrote about the skepticism Libra, Facebook’s proposed cryptocurrency, faced from U.S. regulators. Since then, Libra’s unpopularity has spread across the Atlantic. Public officials in France, Germany, and the UK have claimed Libra could undermine monetary sovereignty and have begun calling for a public digital currency in lieu of Facebook’s private-backed proposal. The focus on the systemic risk posed by Libra is a new area of concern, as U.S. regulators have primarily criticized Libra for its potential use in money laundering and terrorism financing.
European Regulators Speak
Out In late August, Bank of England’s chief Mark Carney raised the idea of a public sector alternative to Libra.1 He touted potential benefits of such a “Synthetic Hegemonic Currency,” namely dampening the influence of the U.S. dollar on global trade and, accordingly, any U.S. economic shocks on the global financial system.2
Finance minister of France Bruno Le Maire has also addressed the risks of Libra. Speaking to the Organisation for Economic Cooperation and Development in Paris earlier this month, Le Marie not only echoed the “serious” concerns relating to money laundering and terrorism financing risks, but also warned that European nations—particularly those with weak currencies—could see their monetary sovereignty put at risk. Le Maire stated that a centralized cryptocurrency like Libra creates “systemic risk” and could “create considerable financial disruption” if it were to break down.3 Le Maire also seemed to agree with Carney’s idea of a public version of the digital currency, and stated he had been in touch with the European Central Bank (“ECB”) regarding the idea.
German finance minister Olaf Scholz took perhaps the most direct opposition to Libra, stating that Germany “cannot accept a parallel currency,” and that it must be clearly rejected.4 According to reporting, Scholz said he will work with his European counterparts to prevent coins like Libra from becoming alternatives to “official currencies.”5
Finally, ECB Executive Board member Yves Mersch (admittedly a cryptocurrency skeptic)6 took an almost philosophical approach to the problems posed by Libra in a speech given at the ECB Legal Conference in early September.7 According to Mersch, money necessarily belongs to the realm of state sovereignty because public trust in any particular currency is necessary for it to properly function. Libra, backed by private tech companies, including one which is already under intense regulatory scrutiny for its business practices in the EU, inherently lacks this public trust. Mersch also highlighted the possibility that the ECB’s control over monetary policy may diminish to the extent that Libra becomes an established alternative to the Euro.
Walmart Considers its Own Digital Currency
Facebook is not the only big-name private company with an interest in cryptocurrencies. According to a filing published on August 1 by the U.S. Patent and Trademark Office,8 in January 2019 Walmart filed a patent application for a digital currency tied to a regular currency such as the U.S. dollar. Reports state that Walmart already uses blockchain technology as part of its supply chain management, so the step into cryptocurrencies may be the next step in vendor and customer management by reducing credit card fees and other transaction costs.9
Although Walmart has stated that it does not have any plans to use the patent at this time, its established track record in money transfer services may make the company more palatable to regulators than Facebook depending on how Walmart decides to proceed into the crypto business. For now, Walmart’s patent application suggests the company plans to use the cryptocurrency as more of an add-on to its own business rather than overhaul global financial systems.
Libra continues to face intense regulatory scrutiny across the globe. Concern from European regulators about the systemic financial risk Libra poses is perhaps the greatest threat yet to the cryptocurrency. Facebook and its Libra Association partners have yet to publicly release detailed plans for addressing not only these concerns, but also those regarding money laundering and terrorism financing. In the end, Libra may become its own worst enemy, serving as the catalyst for an alternative public digital currency—at least in Europe. Meanwhile Walmart may be the vanguard of other private companies shifting to a more cryptocurrency-based business model. Walmart’s plan, limited in scope, may serve as a more effective introduction of cryptocurrency into mainstream retail systems.
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1 Mark Carney, Governor of the Bank of England, Speech at the Jackson Hole Symposium 2019: The Growing Challenges for Monetary Policy in the Current International Monetary and Financial System (Aug. 23, 2019), https://www.bankofengland.co.uk/-/media/boe/files/speech/2019/the-growing-challenges-for-monetary-policy-speech-by-mark-carney.pdf?la=en&hash=01A18270247C456901D4043F59D4B79F09B6BFBC.
2 Id. at 15.
3 Dean Seal & Philip Rothstein, French Finance Minister Vows to Block Libra in Europe, Law360, Sept. 12, 2019, https://www.law360.com/publicpolicy/articles/1198293?utm_source=LexisNexis&utm_medium=LegalNewsRoom&utm_campaign=section.
4 Michael Nienaber & Christian Kraemer, Germany’s Scholz: We cannot Accept Parallel Currencies Such as Facebook’s Libra, Reuters, Sept. 17, 2019, https://www.reuters.com/article/us-germany-blockchain/germanys-scholz-we-cannot-accept-parallel-currencies-such-as-facebooks-libra-idUSKBN1W21TR.
6 Yves Mersch, Member of the Exec. Bd. of the ECB, Lecture at the Official Monetary and Financial Institutions Forum, London (Feb. 8, 2018), https://www.ecb.europa.eu/press/key/date/2018/html/ecb.sp180208.en.html.
7 Yves Mersch, Member of the Exec. Bd. of the ECB, Speech at the ECB Legal Conference, Frankfurt am Main, Money and Private Currencies: Reflections on Libra (Sept. 2, 2019), https://www.ecb.europa.eu/press/key/date/2019/html/ecb.sp190902~aedded9219.en.html.
8 U.S. Patent Application No. 20190236564 (filed Jan. 29, 2019), http://appft.uspto.gov/netacgi/nph-Parser?Sect1=PTO2&Sect2=HITOFF&p=1&u=%2Fnetahtml%2FPTO%2Fsearch-bool.html&r=1&f=G&l=50&co1=AND&d=PG01&s1=20190236564&OS=20190236564&RS=20190236564#Cite_@inthepixels.
9 See, e.g., Olga Kharif, Walmart Seeks to Patent a Way for Using Digital Cryptocurrency, Bloomberg (Aug. 2, 2019), https://www.bloomberg.com/news/articles/2019-08-02/walmart-seeks-to-patent-a-way-for-using-digital-cryptocurrency.