Bank of Japan Voices Concerns about Facebook’s Crypto Project

Asia Blockchain Review
July 19, 2019

The Bank of Japan (BoJ) has joined regulators around the world in expressing concerns over Facebook’s permissioned digital currency project, known as Libra.

As reported by CoinDesk, the Japanese central bank is worried that the planned cryptocurrency, backed by a basket of fiat currencies and government securities, would be difficult to regulate and could therefore pose a risk to financial systems.

Wider Adoption of Cryptocurrencies May Affect Existing Systems 

With Facebook linking Libra to multiple national currencies, concerns abound that the social media giant is attempting to circumvent undue control from any single national regulator.

BoJ Governor Haruhiko Kurodo has said he intends to closely monitor whether cryptocurrencies could become more generally adopted as a means of payment, and how this would affect existing financial and payment systems.

A Nikkei report suggested that as users withdraw money to purchase the Libra token from regional banks, Facebook would likely place those reserve funds in Japan’s larger banks to the detriment of minor institutions.

Additionally, a resulting hike in demand for government securities could see falling interest rates that would further threaten Japan’s financial stability.

Governments Worldwide Say No Free Ride for Crypto Projects?

One BoJ official indicated that Facebook would essentially be running its crypto project freely using financial institutions that must expend substantial resources and capital just to maintain compliance with regulators.

Similar fears in the United States have prompted lawmakers to call for a freeze on the Libra project pending its proper assessment.

Regulators in France and the United Kingdom, together with nations such as Singapore, have also raised concerns over the project.


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