The Central Bank of Japan joined the regulatory authorities of other countries, expressing concern about the potential risks associated with the Facebook Libra cryptocurrency.
In the report
The Nikkei Asian Review states that the Bank of Japan is concerned that the planned
The launch of Libra’s cryptocurrency next year will be difficult to regulate, which may lead to a risk for the financial system. Nikkei quotes an unnamed official from the Bank of Japan, who recently said:
“It will move money to a completely virtual world, this cryptocurrency will be radically different from other forms of digital payments.”
The report assumes that by tying Libra to more than one national currency, Facebook may try to avoid undue control by regulators in any one country. Bank of Japan Governor Haruhiko Kuroda (Haruhiko Kuroda) said he intends to “closely monitor” whether cryptocurrencies can become generally accepted as a means of payment and how existing financial and payment systems can be affected.
Further, the publication states that, since Libra users will withdraw money from regional banks to buy a token, and Facebook will most likely place support for cryptocurrency in large banks, this will lead to an outflow of funds from smaller institutions.
Increasing demand for government securities as a result of the Libra launch could also lead to a drop in interest rates, says Nikkei, suggesting that both of these factors could damage Japan’s financial stability. The Bank of Japan official also suggested that the Facebook cryptocurrency project would “use the financial system for free, which is expensive.” In essence, the firm will manage Libra, using financial institutions, which have to spend large sums on providing assets in accordance with the requirements of regulators.
In the US, such concerns prompted lawmakers to urge
Facebook freeze the project until it is properly evaluated. In addition, more than 30 different public organizations in the USA have signed
an open letter to Congress with a request to suspend or cancel the development of the stable Libra.