BERLIN (Reuters) - Germany has passed a comprehensive blockchain strategy in which Berlin vows to fight any company efforts to establish a parallel currency, in the latest sign that Facebook’s planned Libra faces tough regulatory hurdles in Europe.
The U.S. social media giant’s Libra project is the most well-known of the stablecoins, a certain form of cryptocurrency backed by assets such as traditional money deposits, short-term government securities or gold.
In its blockchain strategy passed by Chancellor Angela Merkel’s cabinet on Wednesday, the government says it wants to boost the digital transformation of its economy but also tackle the risks stemming from such new technologies.
“We want to be at the forefront and further strengthen Germany as a leading technology location,” Finance Minister Olaf Scholz said, adding that blockchain technology could contribute to this as it was a building block of the future Internet.
“At the same time, we must protect consumers and state sovereignty,” Scholz said. “A core element of state sovereignty is the issuing of a currency, we will not leave this task to private companies.”
The German government aims to liaise closely with its European and international allies to prevent stablecoins from becoming alternative currencies, according to the blockchain strategy passed by cabinet.
Berlin will intensify its existing dialogue with the Bundesbank, Germany’s national central bank, about digital central bank money in order to explore the current state of developments and address possible risks, it said.
The German government also aims to propose legislation this year which would allow the introduction of blockchain-based electronic bonds, the document showed.
France and Germany said on Friday that Facebook’s Libra currency poses risks to the financial sector that could block its authorisation in Europe. They also backed the development of an alternative public cryptocurrency in Europe.
The criticism comes as the European Central Bank is working on a long-term plan to launch a public digital currency that could make projects such as Libra redundant.
On Tuesday, ECB board member Francois Villeroy de Galhau said stablecoins like Facebook’s Libra highlighted gaps in rules, adding that the media giant’s payments project faced a tough regulatory approach.
Facebook’s Libra is in close contact with European regulators such as Germany’s financial markets watchdog Bafin to sound out regulatory hurdles.
“We are in intensive discussions with Libra,” Bafin president Felix Hufeld told reporters last week, adding that some complicated questions still had to be addressed.
“We have asked questions, we have received responses. Very specific questions, less detailed answers,” Hufeld said.
This showed that many questions of high economic relevance had not been thought through completely yet by the Libra people themselves, Hufeld added.
Reporting by Michael Nienaber; Additional reporting by Hans Seidenstuecker; Editing Joseph Nasr
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