A former executive of Japan’s central bank recently sounded a note of warning to central banks globally. Based on a report by Reuters, the ex-banker stated that Facebook’s cryptocurrency could threaten the power held by central banks over their various monetary policies.
Libra has not had rosy days since its introduction, with different jurisdictions questioning the motive of the stablecoin. While some regulators have asked the social media company to stop further developments of the project, others need more time to study the cryptocurrency before coming to a conclusion.
Facebook’s Crypto is Coming for Our Lunches
Back in June 2019, the Bank for International Settlements (BIS) warned that Facebook’s cryptocurrency, Libra, might be a threat to the global financial system. According to Libra’s whitepaper, the stablecoin offers lower cost and a faster payment system.
In addition, digital currency aims to provide financial access to almost two billion unbanked people in the world. The report added that the BIS believed Libra’s services could ultimately bring about the monopoly that in the end, could render Wall Street Banks ineffective.
Now Hiromi Yamaoka, a past executive at the Bank of Japan (BOJ) who was in charge of the bank’s research into bitcoin and other cryptocurrencies, has come out to issue a similar warning, this time to central banks.
According to the ex-BOJ executive, the global adoption of Facebook’s Libra could threaten the control that different central banks have on monetary policies.
Yamaoka buttressed further, saying:
“If Libra becomes more widely used than the sovereign currency of a particular country, the effect of monetary policy may be severely undermined.”
The former banker who is knowledgeable in virtual currencies also stated that a universal regulatory framework is important, as individuals can easily send and receive bitcoin and other cryptocurrencies to any part of the world. However, countries without uniform regulations weaken the enforcement of these regulations.
While the Libra cryptocurrency wouldn’t necessarily shake governments with stable currencies, Yamaoka said the advent of Facebook’s digital currency could force policymakers to be more disciplined and be careful not to take steps that would devalue their fiat currencies.
Libra Backlash Not Enough to Halt Crypto Advance
Since the announcement of Libra, different regulators and governments across different jurisdictions have expressed concerns ranging from Facebook’s ability to ensure data privacy – considering its turbulent past – to regulation.
At some point, a member of the US Congress, Maxine Waters, requested that the social media giant suspend its plans for the cryptocurrency until regulators carry out thorough investigations.
U.S. Senator, Sherrod Brown from Ohio, also asked that the California-based technology giant cease work on its cryptocurrency project. According to Senator Brown, Facebook’s privacy troubles in the past made it almost impossible to allow the company to go through with its plans to create a global cryptocurrency.
In addition, a board member of the European Central Bank (ECB), Benoit Coeure declared that until regulators and governments were sure that Libra safe to deal with and would serve as a tool for money laundering or cause financial instability, the project would not see the light of day.
With all the regulatory brouhaha and threats coming from every corner, Yamaoka however, states that banning the Libra project from taking off would prove “difficult and counter-productive”.
Facebook recently came out to state that the Libra cryptocurrency may never launch, due to regulatory pressure. Yamaoka acknowledged this possibility and said that other companies could easily create their own cryptocurrency. The former banker adds that no policy could stop the cryptocurrency industry.
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