TOKYO (THE YOMIURI SHIMBUN/ASIA NEWS NETWORK) – There is a possibility of significant changes in the global financial order.
Each country should work in close cooperation to clarify problems and swiftly prepare international rules to deal with them.
US social networking giant Facebook Inc announced a plan to launch its own cryptocurrency called Libra in 2020, which has caused a stir.
Competition for digital advertisements, which support profits, is fierce. Facebook appears to be aiming to enter a new field and enhance its revenue base.
Unlike ordinary cryptocurrencies that are traded for speculative purposes and whose prices fluctuate, Libra is said to be backed by legal tender, such as the yen and the dollar.
The main operators of Libra, including Facebook and a leading credit card company, would manage cash in exchange for issuance of the cryptocurrency, by using high-security bank deposits and short-term government bonds.
Facebook said it would try to keep the price stable through these methods.
It is possible to send money overseas easily through the internet and smartphones.
The commission involved is lower than that charged by banks. There are 2.7 billion Facebook users and Libra might rapidly spread.
Libra would circulate on the internet. It could pose a threat to state sovereignty in the issuance and management of currencies, and become an uncontrollable cryptocurrency beyond the surveillance of authorities.
It is reasonable for each country to develop a sense of urgency.
There are fears that the spread of Libra would hinder the effects of the financial policies of each central bank based on legal tender.
It is understandable that US Federal Reserve Board Chairman Jerome Powell and others have expressed serious concern regarding the cryptocurrency.
A number of criticisms were made against Libra from lawmakers in a public hearing at the US Congress.
Information on up to 87 million users was illicitly leaked via Facebook. Behind the criticism is strong distrust of Facebook’s management system.
As much criticism has been voiced, it is natural that a Facebook executive has said the company would not offer the Libra digital currency until it had received appropriate approval.
There is a risk of Libra being abused for money laundering or tax evasion.
Cryptocurrencies are highly anonymous. When money is sent via banks, identities are carefully confirmed.
But it must be said that it is unclear whether such identity confirmation would be fully conducted in Libra transactions.
If significant amounts of money are withdrawn from banks and changed into Libra, it could rock the financial system.
Financial institutions dealing with savings and payments are subject to strict restrictions by the financial authorities of each country.
However, it has yet to be decided who would keep an eye on the currency arena Libra would create and how they would do so.
Various internet businesses have emerged and new financial methods, such as payments through smartphones, are spreading.
It can be said that it is a common challenge in the world to create effective regulations suited to economic digitisation.
It is necessary to deepen discussions within international frameworks, such as the Group of Seven nations.
The Yomiuri Shimbun is a member of The Straits Times media partner Asia News Network, an alliance of 24 news media organisations.