Daniel Daianu, president of Romania’s Fiscal Council, told members of the Romanian Academy Tuesday that Facebook’s Libra cryptocurrency could destroy the current global monetary balance and so disrupt the work of central banks that they become ineffective at managing money supplies, Agerpres reports.
Facebook hopes to begin enabling cryptocurrency payments throughout its network of 2.4 billion users by 2020.
The company says it plans to “back” libra coins using a basket of real-world national currencies and short term bonds.
The Fiscal Council “is a relatively new institution” established to help Romania integrate EU fiscal regulations into domestic laws.
Daianu commented on how Facebook would predicate its network coin on standard currencies while seeking to disrupt the standard financial order:
“Cryptocurrencies are highly speculative financial assets, and assets such as Libra – whether they rely on a bunch of assets which are considered safe or on coins – are very dangerous because they are part of the logic of those who believe that there is a need for parallel markets, the disappearance of central banks. There is such a way of thinking.”
Daianu acknowledged that enthusiasm for cryptocurrencies has been partly informed by opposition to malfeasance among mainstream financial players,
The type of disruption envisioned by “(crypto) libertarians,” however, said Daianu, could “fracture” current global monetary systems:
“The financial crisis ruined the reputation of governments and central banks, and some think we need other currencies, parallel circuits, non-hierarchical structures. So the discussion is much deeper. It is not only about the monetary system. It is not by chance that libertarians are so attached to this vision. Those who reject central banks would like to return to the world of free-banking. That is why Libra is very dangerous, because it would target billions of users and in fact would almost inevitably fracture the monetary system and central banks would lose their effectiveness.”
Daianu is far from the only regulator to have decried the danger of a private currency network run by a corporation with a spotty ethical track record.
Regulators in China, Japan, Australia, the US, France, Spain, the UK, and Germany have all issued stern warnings regarding Facebook’s libra since the project was announced last May.
Some of those regulators are concerned that Facebook users living in countries with small, less stable local currencies could be inclined to dump local money in favour of using Libra.
Under those circumstances, local currencies could rapidly devalue.
Romania is a region using a non-reserve currency, and the Fiscal Council’s landing page states that it was created, in part, to manage risks implied when a country’s money is not a reserve currency:
“The fiscal space is vital in emerging economies which, by definition, do not issue reserve currency. Such economies need appropriate ‘buffers’, especially in times of high uncertainty and rapidly changing financial markets. The Romanian leu is not a reserve currency and the National Bank of Romania does not have a space for maneuver similar to large central banks. That is why imbalances must be a cause for serious concern in order to avoid the deterioration of financial stability, sovereign risk assessment, financing and the dynamics of the economy.”
The Fiscal Council site also states that it, “has its origin also in the lessons of the Great Recession. Countries with vulnerabilities, augmented by pro-cyclical fiscal policies, external deficits and increased indebtedness fueled by the unrestricted capital movement (specific to the Single Market) and by the lack of macro-prudential tools, have suffered painful corrections after 2009. This reality calls for prudence and caution when formulating economic policies…”
Managing money supplies is already hard enough, Daianu told the Romanian Academy, and rules, even in regular finance, should get tighter:
“For the future, if we put cryptocurrencies aside, which have to be very strictly regulated, I am for a very severe regulation of capital markets, of what is called the shadow banking sector. In the future, monetary policy will be a mix of a pragmatic inflation targeting and the control of monetary aggregates. Macro-prudential measures inevitably also mean the control of monetary aggregates because we are trying to (manage) the movement of money in the economy.”