Amid the concerns of an array of global regulators, the Bank of Japan (BoJ) has now taken a stand against Facebook’s upcoming cryptocurrency Libra.
Masayoshi Amamiya, deputy governor of the Japanese central bank, on Friday, warned the social media giant that all digital currencies must comply with the regulations on money laundering and risk management, Reuters reported.
Disrupting the banking system
Facebook officially announced its digital currency last month, which raised concern among lawmakers and regulators. Though other digital currencies have been available for years, Facebook, with its 2.78 billion user base, has the potential to disrupt the current financial industry, by making the use of digital currencies mainstream.
The BoJ official thinks that Facebook’s plan to introduce the currency is risky and warned central banks to be vigilant about its impact on banking and settlement system.
“As for Libra, we must bear in mind that the potential global user-base could be enormous,” Amamiya told Reuters.
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He also revealed that the BoJ had shelved the plan to introduce a digital currency amid the uncertainties in regulations in the sector.
“If central bank digital currencies replace private deposits, that could erode commercial banks’ credit channels and have a negative impact on the economy,” he added.
On the idea of putting negative rates on digital currencies, he said: “To overcome the nominal zero lower bound, central banks would need to eliminate cash…Eliminating cash would make settlement infrastructure inconvenient for the public, so no central bank would do this.”
Amamiya’s warning came only a couple of days after another official from the Japanese central bank raised concerns about the impact of Libra on the financial system.
“It will move money into an absolutely virtual world, so it is completely different than other forms of digital payment,” the unnamed official told Nikkei Asian Review.
Meanwhile, Facebook will face two hearings in the United States this month – one by the Senate and another in front of the House – and have to explain the privacy implications of the upcoming coin.