Photo by Yang Jing on Unsplash

Perspectives on (Ca-)Libra #3: Why the Libra is not e-money (also: the history of e-money and stablecoins)

Quickly after the announcement of Libra, I, stated that Libra could not be viewed as e-money. Now has come the time to explain my earlier analysis (of June 2019) as to the regulatory qualification of Libra.

Libra is a privately issued and distributed digital and virtual ‘currency’, that is intended to function as a means of payment. It is not a true currency because its actual composition/counter value is a basket of fiat-currencies and financial instruments. It is not e-money as the Libra is not ‘monetary value’. The digital value qualifies as a financial instrument (a mini-participation in an open ended investment fund) and is used in an open source payment instrument, to be used for payment and acquiring. Both payments and securities legislation apply, as well as the relevant competition and consumer protection rules.

1- Definitions of e-money and term: monetary value
The reason why Libra, as a basket of a set of different currencies, cannot be considered e-money is that it doesn’t qualify as such as it is not monetary value under the definition. And to comprehend the definition we must understand that the European E-money directive has had a first version and that the European Central Bank was clear on its analysis. E-money is a fiat currency in a digital shape and is a form of monetary value that must be treated as such in terms of: reporting requirements for monetary aggregates, redeemability (at par), assurance that customer fiat money equivalent was kept safe etcetera.

Dutch banking, payment and digital money / blockchain expert - Also: tours & talks on financial history