Bank for International Settlements: Facebook's coin is a threat to banks
|- BIS published a report dedicated to the risks related to Facebook's Libra coin.
- Coins, created by hi-tech companies, may pose systemic risks.
Libra, the cryptocurrency introduced by social media giant Facebook could damage the banking sector and threaten financial stability, the Bank of International Settlements (BIS) warns in the recent report.
BIS, which is often called the "central bank of central banks," is concerned that payment systems developed by a hi-tech giant like Facebook or Google can quickly gain dominance and replace traditional banking systems. These companies have multi-million user bases that will serve as an excellent jumping-off ground for them.
"At the same time, big techs' entry into finance introduces new elements in the risk-benefit balance. Some are old issues of financial stability and consumer protection in new settings. In some settings, such as the payment system, big techs have the potential to loom large very quickly as systemically relevant financial institutions. Given the importance of the financial system as essential public infrastructure, the activities of big techs are a matter of broader public interest that goes beyond the immediate circle of their users and stakeholders," the report says.
By launching various payment services, including cryptocurrency, large companies will make financial services more accessible; however, they will also make the global economy more vulnerable and less table, BIS experts explain in the report.
The document also emphasizes that regulators should coordinate their efforts and develop a "comprehensive" approach to level the playground for large technologies and banks.
Last week Facebook published a White Paper of its proprietary cryptocurrency. Since then, regulators of several countries have expressed their concerns about the digital asset controlled by the social network and called for tight regulation for it.
Thus, French Finance Minister Bruno Le May said that the Libra should not and cannot become a sovereign currency;
Russian politicians also came up with critical comments. The chairman of the State Duma Committee on the Financial Market, Anatoly Aksakov, said that Russia would not legalize Facebook" coin and would introduce restrictions for foreign platforms where that coin would be listed.
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