France and Germany Agree to Block Facebook's Libra

I'm not sure France and Germany fully get what they are trying to ban exactly. Most politicians only have a very rudimentary understanding of this stuff and probably lots of misconceptions.

Libra is several things; most of which already exist in other forms in the EU. That makes it hard to block as a whole. At least not without also impacting a lot of other companies and people doing similar things because the law should apply equally to all.

First of all, it's a permissive blockchain similar to e.g. Ripple and Stellar, both of which are used by companies in the EU; some of which are fintech companies actively collaborating with the German, French and other governments. Some of the coins on these platforms are stable coins for euros, dollars and other coins. Some of them represent bonds (e.g. a German company called Bitbond) and some of them of them are new coins. Some EU companies even offer credit cards backed by crypto currencies (e.g. Wirex is based in the UK and offers it's products to people in Germany and elsewhere).

Then there is the notion that quite a lot of EU citizens own and actively trade in bitcoin, eth, and a wide variety of other coins already. Why would a Libra coin be any different just because Facebook is behind it? The scope of what they can ban here under existing laws seems unclear. Making new laws takes ages and has so far not really happened. Most blockchain companies operate under interpretations of the existing laws. My guess is that market making for Libra like Facebook is planning would probably be subject to regulation and also be problematic in many other countries (like the US).

Then there is Move, the language used for implementing smart contracts in Libra. That too already exists in the EU market in the form of loads of companies doing all sorts of things on top of mainly Ethereum and using Solidity, which is technically similar. You can argue about how useful these things are but there is a lot of investment happening in startups doing things with block chains and smart contract. A lot of that is happening with permission of the relevant authorities. E.g Bitbond was approved by the German Bafin.

So, singling out Facebook to do any of those things does not sound like it would be very practical from a legal point of view.

What they can do is take action if Facebook starts promoting and trading it's own currency within Facebook which I'm guessing would require a bank license or at least expose them to financial regulation.

My guess is that Facebook will instead launch Libra with a simple stable coin backed by euros and dollars and post pone launching their own coin. This would make it more similar to what e.g. Apple Pay and Android Pay enable: a simple online wallet that users may use for paying for things online. The fact that there's a blockchain involved is maybe technically interesting but not necessarily a problem. I'm guessing they'll also be exploring using smart contracts for a few things. Facebook as a payment provider would of course be subject to the same kind of rules that Apple, Google, and others have to deal with.

A further complication might be that Facebook is isolating Libra into a separate foundation. That might shield them legally and allow them to push some boundaries. One thing they might eventually do is launch Libra the coin only in certain markets. They were talking a lot about third world countries in the original announcement.

Using Libra is morally questionable as you're giving away currency and economy control to a bunch of private entities motivated by profit and accountable to no one.

>Best thing you can do is to make a law that forces banks to prevent payments to known Libra sellers, but again if there is value in Libra this hardly makes a difference.

It does make a gigantic difference. They don't need to ban all of the Libra exchanges, just the big and knowledgeable ones, and go around banning anything that goes too big, so that people who want to retrieve EUR from Libra need to search a lot and comb through exchanges to see who's trustworthy. That makes using Libra a hassle, and if there's not a lot of adoption of Libra and it doesn't reach a critical mass, the currency becomes useless.

> if there is any benefit of having some Libra people will have it

That's a big if.

Facebook can't prevent people from using it via fake profiles, etc. that have the intent to bypass things. Unless we want Facebook profiles to always be official profiles (validated via government ID) - which the government would like.

France and Germany can entertain IP blocking these services and put laws in place for citizens to not use it. Interestingly though, this is exactly what a free country should not do I guess.

There is a quibble to be made although in the main I'm quietly nodding and agreeing.

> none can afford to hold the more valuable currency due to the damage caused to export business.

So it is said, but there are more effective ways to prop up an export business. Eg, direct subsidies for strategically important sectors. Lowering currency value does help exporters, but it helps them by basically giving free goods and services to foreigners at the expense of someone else. The US lowering their currency doesn't result in a better deal for the US nation. It results in more goods and services leaving the country than is honestly justified for the amount of imports. Resources are misallocated away from US consumers to foreign consumers. Economically speaking, that is an own-goal.

The US debt-to-gdp is on a wartime footing [0]. Devaluing the currency favours debtors. A link between those two facts is more plausible than governments really believe giving goods & services away to foreigners is a path to prosperity. There is a broad economic philosophy that has taken root that debt funded consumption is to be encouraged and monetary policy is a key tool for that viewpoint.

[0] https://tradingeconomics.com/united-states/government-debt-t...