Libra, the currency-project of the Facebook group, is still rattling the nerves of central bankers and their allies in the finance ministries. In the EU, five of the biggest member states are demanding stringent rule for the regulation of cryptocurrencies.

Facebook is facing stiff resistance for its stablecoin project: in Switzerland, the home of the Libra Association, the request has been pending for some time. And in the European Union, one of the world’s biggest markets, five powerful nations have combined to enforce stringent rules for cryptocurrencies.

Urged on by German Finance Minister Olaf Scholz, the five nations of Germany, France, Italy, Spain and the Netherlands have penned a declaration demanding that the EU should only license stablecoins under strict conditions, «heise.online» reported (in German).

Issues of Sovereignty

The authors of the declaration are concerned about the financial sovereignty of states and the power of central banks to enforce monetary policy. With the emergence of projects such as the Libra bid by Facebook, authorities of the state have started worrying that monetary policy will no longer be viable once consumers gain access to global currencies. Monetary policy depends on having a currency to enforce it.

A string of central banks are pursuing their own projects for so-called digital central bank currency. In China, certain regions have received access to an e-yuan; in Sweden, the central bank is at an advanced stage with its e-krona project, while the Swiss National Bank (SNB) is currently evaluating the introduction of digital central bank money for participants of the financial market.

Ban If Need Be

The EU-5 are demanding that a stablecoin can be exchanged at all times with existing money and that assets of reserve have to be deposited with finance firms licensed by the EU.

The Commission of the EU is slated to present its proposal for regulation this year and Scholz can actively influence the progress made as finance minister of the German Council presidency. The five nations support the Commission in its quest to ban cryptocurrencies if they don’t meet all the criteria set by the EU.

The Consequences for Switzerland

Should the EU agree on a strict set of rules for cryptocurrencies, Switzerland will surely take a close look – the country is surrounded by the EU and won’t normally be able to run an independent policy.

The application by the Libra Association to be considered as a payment system is pending with the Swiss financial market regulator Finma. The Bern-based authority had confirmed the reception of a request in April and affirmed that it would not only seek advice from the SNB, but also from other central banks and regulators.