After Facebook announced the Bitcoin rival it has been developing: Libra, regulators have expressed concerns over the new coin harming financial systems.
European politicians and Bank of Japan insiders issued stark warnings calling for tighter regulation of the platform. Some of the most vocal opponents are French Finance Minister Bruno Le Maire and Markus Ferber, a German member of the European Parliament.The Bank of Japan is at the forefront of central banks worldwide that are preparing for next year’s launch of Facebook’s cryptocurrency Libra. Many financial institutions have commented on the difficulty to regulate such coins, which will pose a risk to financial systems while exploiting their existing structure at no cost.
“It will move money into an absolutely virtual world, so it is completely different than other forms of digital payment,” a BOJ official said recently.
In response, Fred Roeder, Managing Director at the Consumer Choice Center, said that “these political threats were harmful to consumer choice, and would ultimately backfire”.
“Overseeing regulation on Internet and financial firms is important, but the ’regulate first, innovate later’ mentality that came in response to Libra should give every Internet user a reason to be concerned. If every new Internet innovation now needs to be approved by lawmakers, that sets a dangerous precedent for the future of consumer choice online,” said Roeder.
Roeder believes that consumers have the right to choose if they want to use cryptocurrencies, or social networks. He stressed the importance of consumers being aware of the great risks and benefits that go along with that. People are looking for alternatives, especially with new digital tools, which is why there is so much interest from consumers.
Similarly, Bank of Japan Gov. Haruhiko Kuroda intends to “keep careful watch” on whether cryptocurrencies could become a mainstream method of payment, as well as how they might affect financial and payment systems, he told reporters on June 20.
Officials also called on the Group of Seven central bank governors to prepare a report on Facebook’s project for the upcoming July meetings. Le Maire’s position is also shared by Markus Ferber, a German member of the European Parliament who expressed a concernthat with more than 2 billion users, Facebook could become a “shadow bank,” and that regulators should be on high alert.
“Multinational corporations such as Facebook must not be allowed to operate in a regulatory nirvana when introducing virtual currencies,” said Ferber.
Meanwhile, Facebook announced plans to link the price of the virtual coin to the prices of various assets and legal currencies like the dollar and the euro. This move to avoid tying Libra to one currency appears aimed at keeping individual countries from exerting regulatory influence over the coin.