Bank of International Settlements (BIS) issues a warning against Facebook's 'Libra'

• BIS noted that major tech companies could threaten the dominance of the global banking sector.
• The BIS report also called out the importance of international collaboration to develop regulations.

One of the world’s oldest global financial institutions, The Bank of International Settlements (BIS) wrote a report titled “Annual Economic Report,” wherein they highlighted the dangers of Facebook’s Libra. The report noted that major tech companies including Facebook, Apple and Google could leverage their massive user bases to pose a legitimate threat to the dominance of the global banking sector. The entry of these major tech companies into the global finance industry not only promises efficiency gains but enhanced financial inclusions as well. However, this mega entrance also has the scope of new and complex trade-offs between data protection, market competitions and stability.

The report calls 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 aim should be to respond to big techs’ entry into financial services so as to benefit from the gains while limiting the risks.”

The BIS report called out the importance of international collaboration to develop regulations. It said, “As the operations of big techs straddle regulatory perimeters and geographical borders, coordination among authorities – national and international – is crucial.”

It seems like the efforts regarding international regulatory started much before the publication of BIS’s report. Reuters had earlier reported that the France government is expected to 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.”

Francois Villeroy de Galhau, governor of the French Central Bank announced that Benoit Coeure, a European Central Bank board member would be leading the task force. Shortly after the project’s whitepaper was released, Bruno Le Maire, the French finance minister 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.”

Additionally, US lawmakers have sprung into action. Congresswoman Maxine Waters (D-CA) has called for a halt on the subject of the development of the currency until the government understands the whereabouts of it. The US Senate Banking Committee will hold a hearing regarding this project on July 16th.