Facebook’s recently revealed stablecoin project named ‘Libra’ threatens the existing stability of the economic systems, as per South Korean financial regulators.
In line with a recent ‘report‘ by native reporting media, the nation’s FSC [Financial Services Commission] appears at what would possibly occur “If 2.4 Bln Facebook users globally transfer one tenth of their bank deposits to Libra.”
Within the upcoming scenario, banks’ financial condition would diminish, as would their loan reserves, representing a threat to rising markets from the relocation of the capital out of those countries.
The FSC additionally raised concerns that bank runs might occur throughout the monetary or foreign crises, as users transfer their national fiat currency to [Libra]. The simplification of money exchange and remittances through Libra is additionally expected to limit central banks’ ability to regulate international capital movements. The effectiveness of financial policy would also be restricted if [Libra] becomes widely exchange for the central bank currency.
Moreover, the agency expressed concerns that Libra might be widely used for laundering activities without the proper managements of the banks. It added that “a giant institution, like Goldman Sachs or JPMorgan,” had refused to participate in Libra.
The project is a serious threat to the traditional banking system, the report adds. If a renowned company like ‘Facebook‘ buys a bond rather than making a fund deposit with user funds, the economic condition of the bank could also be worsened. And if Libra permits nearly free overseas payments, South Korean banks’ trillions of won in revenues from remittances would be just simply considerably reduced.
The probability of successful advertisement of Libra is much higher than for other ‘cryptocurrencies‘, the FSC goes on. Providing monetary services via its social media services like Facebook, WhatsApp and Instagram, with their billions of users, the firm can simply guarantee convenience and the associated price fight.
The FSC stressed that the report is to “facilitate the understanding of the press as well as the other media” on overseas trends and not its official opinion on Libra.