* ECB says work to accelerate on bankless digital cash
* France, Germany say Libra poses risk to EU states'sovereignty
* EU has no specific regulation for virtual currencies
* In EU's legal limbo, Malta developing its own rules (Adds comment by Libra Association, paragraphs 8-9)By Francesco GuarascioHELSINKI, Sept 13 (Reuters) - France and Germany said onFriday that Facebook Inc's Libra currency posed risks tothe financial sector that could block its authorisation inEurope, and backed the development of an alternative publiccryptocurrency.The criticism came as the European Central Bank said it wasworking on a long-term plan to launch a public digital currencythat could make projects such as Libra redundant.Virtual currencies pose risks to consumers, financialstability and even "the monetary sovereignty" of Europeanstates, France's finance minister, Bruno Le Maire, and hisGerman counterpart, Olaf Scholz, said in a joint statementissued at a meeting of euro zone finance ministers in Helsinki."France and Germany consider that the Libra project, as setout in Facebook's blueprint, fails to convince that those riskswill be properly addressed," they said.The 19-country euro zone bloc is united in pursuing a toughregulatory approach should Libra seek authorisations to operatein Europe, officials said at the meeting.
It is also considering a common set of rules for virtualcurrencies, which are currently largely unregulated.The currency union has worked in past years on several plansto make digital payments cheaper and faster, but none of themhas properly taken off so far.The Libra Association, a 28-member organisation Facebook issetting up in Switzerland to manage the currency, said itwelcomed the feedback.Members "are committed to working with regulatoryauthorities to achieve a safe, transparent and consumer-focusedimplementation of the Libra project," Dante Disparte, thegroup's head of policy and communications, said in a statement.
WAKE-UP CALLPlans unveiled in June by U.S. social media giant Facebookto launch its own digital currency, Libra, for payments amongits hundreds of millions of users in Europe and around the worldhave triggered a rethink. Libra was "a wake-up call", European Central Bank (ECB)board member Benoit Coeure told a news conference in Helsinkiafter a meeting of euro zone finance ministers.He said Libra had revived efforts to widen the uptake of anECB-backed project for real-time payments in the euro zone,known as TIPS. The project, launched last year, has been metwith caution by banks. "We also need to step up our thinking on a central bankdigital currency," he added, unveiling a so far little-knownplan.
An ECB official said the project could allow consumers touse electronic cash, which would be directly deposited at theECB, without need for bank accounts, financial intermediaries orclearing counterparties.These actors are all needed now to process digital payments,but may no longer be necessary if the ECB took over theirfunctions, slashing transaction costs. Libra's plan also woulddo without financial intermediaries.
Work on the ECB project started before the launch of Libraand could last months or even years, Coeure said. The technicalfeasibility remains to be seen and opposition from banks islikely. He will present a report on virtual currencies to G7finance ministers next month, officials said.Le Maire said one of the purposes of this initiative was tomake sure that banks reduce fees on international payments. "We encourage European central banks to accelerate work onissues around possible public digital currency solutions," LeMaire said in the joint statement with Germany's Scholz.
LEGAL LIMBO
While euro zone ministers seem united on a tough regulatoryline on Libra, it is less clear whether they agree to set upcommon rules for virtual currencies.The EU's financial services commissioner, Latvia's ValdisDombrovskis, is always careful to underline that cryptoassetsare an opportunity as much as a threat.
The EU does not have specific regulations oncryptocurrencies, which until Libra was unveiled had beenconsidered a marginal issue by most decision-makers because onlya tiny fraction of bitcoins or other digital coins are convertedinto euros.New EU-wide rules came into force last year to increasechecks on virtual currencies' trading venues with the purpose ofreducing risks of money laundering and other financial crime.But apart from that, virtual currencies move in what islargely a legal limbo in the EU, as regulators have not yetmanaged to agree on whether to treat them as securities, paymentservices or currencies in themselves - the latter option beingruled out by most.In the absence of specific regulations, EU officials areassessing whether existing rules governing financial instrumentscould apply, but have so far reached no conclusion.When asked whether Libra would need a licence to operate inthe EU, a spokeswoman for the European Commission told Reutersthat an authorisation would likely be necessary. But "with thepublicly available information on Libra, it is currently notpossible to say which exact EU rules would apply," she added.In Switzerland, Libra is applying for a payment servicelicence, although it could face rules that typically apply tobanks, regulators in the non-EU Alpine state said on Wednesday. The EU-wide legal vacuum has paved the way for smallerstates to fill it. Tiny Malta, which already hosts the bloc'slargest online gambling industry and an outsized finance sector,has devised its own framework to attract virtual currencyoperators.It is unclear whether Malta and other smaller EU stateswould agree with Le Maire's tough stance on Libra andcryptocurrencies.<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^FACTBOX-Facebook's cryptocurrency Libra and digital walletCalibra ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Francesco GuarascioAdditional reporting by Joseph Nasr in Berlin and Katie Paul inSan FranciscoEditing by Louise Heavens and Matthew Lewis)
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