Facebook's Social Media Platforms May Give Libra Unfair Advantage, Says ECB's Lagarde

The new president of the European Central Bank, Christine Lagarde, has expressed concern that Facebook may use its digital platform to promote Libra and lock-out rival stablecoin operators.

In a letter responding to EU lawmakers yesterday, Lagarde said stablecoins addressed many of the problems associated with the existing cross-border payments system.

Facebook may have an unfair advantage over smaller operators because it can use its social media platform to block out rivals and promote its own cryptocurrency.

"If the entities that govern stablecoin arrangements control large digital platforms, they could impact the level playing field by promoting the use of their own solutions, with possible lock-in effects, and/or blocking other service providers or payment methods from their platforms," Lagarde wrote.

She also highlighted that Facebook could combine users' social media data with their financial data, giving them "a strong competitive advantage and undermine market contestability."

Lagarde's letter said stablecoins, such as Libra, should not go into operation until regulators had fully assessed the associated risks.

Lagarde also said that the name "Stablecoin" is misleading.

"It should be clear to stablecoin users that losses could occur and that they would not be covered by the traditional financial stability net, which includes deposit guarantee schemes and central banks' role as lenders of last resort," Lagarde wrote.

Lagarde became ECB President in October, having previously been chair and managing director of the International Monetary Fund.

Lagarde said the ECB should be "Ahead of the curve" when it comes to central bank digital currencies, according to a Reuters report last week.