According to a former employee of the Bank of Japan (BoJ), the cryptocurrency announced by Facebook called Libra could be harmful to fiat currencies in many countries. Regulatory agencies are worried about the effects that this digital currency could have in the market. The information was released by Yahoo News on August 2.
Monetary Policy Could Be Ineffective With Libra
Central banks and other regulatory authorities around the world are worried about the impact that the Libra digital asset could have on the economy. According to Hiromi Yamaoka, former head of the BOJ’s division overseeing payment and settlement systems, Libra could undermine the effectiveness of the monetary policy.
Mr. Yamaoka commented about it:
“If Libra becomes more widely used than the sovereign currency of a particular country, the effect of monetary policy may be severely undermined.”
He went on saying that this is a problem that could affect those countries with weaker currencies, such as Venezuela, Argentina or Zimbabwe, among others. All these countries have developed black markets for foreign currencies and they have also experienced high inflation rates over the last decades.
Nonetheless, with a more competitive landscape for local fiat currencies, monetary authorities could certainly improve their policies and take care of users’ savings. Libra aims at becoming a currency to process transactions, purchase goods and services and also store. These are some of the reasons why many countries are worried about the effects the digital asset could have on the market.
Yamaoka explained that policymakers have to cooperate and coordinate regulations due to the kind of challenge they are currently facing. As he said, inconsistency in rules among countries creates a loophole that makes rules ineffective.
There are different countries that have already mentioned they are worried about Libra and how it could affect the market. Some of these nations include France, the United States, the United Kingdom, Singapore and Italy, among others. Meanwhile, Germany remains open about Libra’s proposal and it would allow the project to continue until things are more clear regarding how the digital asset would work and which is the effect it can have on the market.
The cryptocurrency Libra is expected to be launched as soon as in 2020. However, things could be much more difficult than what Facebook initially supposed.
Yamaoka ended by saying:
“It might be difficult for Facebook to launch Libra in the first half of 2020, as initially scheduled. But it’s easy for other operators to create something similar.”
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