Europe’s Top Economies Reject Facebook’s Libra Cryptocurrency

Germany and France, Europe’s largest and third-largest economies, say they have no place for Facebook’s Libra cryptocurrency. Last Friday, the German and French governments issued a joint statement declaring their opposition to Libra, which they view as a risk to their monetary sovereignty and global economic stability.

The rejection adds to the opposition Facebook (FB) and the Libra Association are facing in their efforts to develop a global digital currency. The Libra Association is the group that will manage the Libra cryptocurrency network. It boasts over two dozen members, including PayPal (PYPL), eBay (EBAY), Visa (V), MasterCard (MA), and Uber Technologies (UBER).

This month, a top official at the European Central Bank described the Libra efforts as Facebook’s “treacherous promises.” US officials have also have signaled discomfort with Libra. In July, Donald Trump that Facebook’s Libra has little dependability. Additionally, Fed chair Jerome Powell said the cryptocurrency raises financial stability concerns.

Development of Facebook’s Libra continues despite opposition

Facebook is pressing on with Libra’s development. Today, Libra Association representatives met with officials of the world’s largest central banks under the BIS (Bank for International Settlements) umbrella. They discussed regulatory issues surrounding reserve-backed cryptocurrencies such as Libra. The BIS says it will release a final report on the topic about a month from now.

The Libra Association is seeking payment system licensing in Switzerland. Additionally, it has invited outside experts to help test the security of Libra’s technology and has recruited lobbyists to push for favorable regulations.

Facebook looking to diversify its business

If the Libra project is successful, it could boost Facebook’s business diversification efforts significantly. Presently, Facebook relies on advertising for the vast majority of its revenue. In fact, Facebook is more dependent on ad dollars than many of its peers. For instance, advertising contributed 99% of Facebook’s revenue in the second quarter. Meanwhile, advertising contributed 86% of revenue at Twitter, 84% at Google parent Alphabet, and 70% at Yandex. Through Libra, Facebook hopes to expand in the financial services market through its subsidiary, Calibra, thereby generating more non-advertising revenue.