The Bank for International Settlements (BIS), the world’s oldest global financial institution, has issued a warning that Facebook’s new stablecoin project, Libra, could pose a threat to the dominance of the global banking sector. The warning came in a section entitled “Big tech in finance: opportunities and risks,” in BIS’ Annual Economic Report, published on Sunday.
In the report, BIS explained that major tech companies–including Apple, Google, and Facebook–could “rapidly establish a dominant position” because of their large user bases.
And while the entry of “big tech” into the global finance industry “holds the promise of efficiency gains and can enhance financial inclusion,” “big techs’ entry presents new and complex trade-offs between financial stability, competition, and data protection.”
“Benefit from the gains while limiting the risks.”
As such, the report also called for regulatory action.
“Public policy needs to build on a more comprehensive approach that draws on financial regulation, competition policy and data privacy regulation,” the report said. “The aim should be to respond to big techs’ entry into financial services so as to benefit from the gains while limiting the risks.”
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BIS explained that international collaboration to develop regulations is extremely important. “As the operations of big techs straddle regulatory perimeters and geographical borders, coordination among authorities – national and international – is crucial.”
Lawmakers Around the World Are Already on the Move
But the beginnings of international regulatory efforts seem to have sprung up even before BIS’ report was published. On Friday, Reuters reported that the government of France would create a G7 force “to study how central banks ensure cryptocurrencies like Facebook’s Libra are governed by regulations ranging from money-laundering laws to consumer-protection rules.”
The group, which was announced by French Central Bank Governor Francois Villeroy de Galhau, explained that the task force would be led by Benoit Coeure, a European Central Bank board member.
After the project’s whitepaper was released last week, French finance minister Bruno Le Maire said that Libra “can’t and…must not happen” and that “it is out of [the] question” for Libra coins to “become a sovereign currency.”
Lawmakers in the US have also sprung into action. Congresswoman Maxine Waters (D-CA) called for a moratorium on the development of the currency until the US government understands more about it; the US Senate Banking Committee will hold a hearing on the project on July 16th.