Hiroshi Yamaoka, a former Bank of Japan executive, has stated that the use of Facebook’s Libra stablecoin could cause a fundamental change in the operating power of Central Banks across the world.
Speaking in an interview with Yahoo! News, Yamaoka, who handled research into cryptocurrencies while at the Bank of Japan, said that countries which see Libra get adopted quicker and faster than their native currencies could see some massive issues going forward.
He, however, pointed out that countries with stronger market trust in their currencies won’t necessarily need to worry about this eventuality. The former policymaker believes countries experiencing lowering trust in their fiat currencies should worry more.
Regardless, he expressed his opinion that the emergence of Libra would “put pressure on policymakers to discipline themselves,” and take great care not incessantly to undermine the value of their currencies.
In a separate interview with Reuters, he stressed that thanks to the choice of the social media giant to back its stablecoin to a basket of several currencies, policymakers are now more wary of the asset, as a decision to change the composition of the assets backing currencies could go as far as changing exchange rates and affecting the values of currencies.
For countries with low trust in their currencies, this eventuality could significantly reduce the potency of their monetary policies. Undoubtedly, stock trading and other financial activities in such countries will be greatly affected.
As far as recommendations go, Yamaoka pointed out that if Libra gets launched, it will go on to become a global currency. So, the only way to combat such a scenario would be for regulators around the world to develop collective regulations on the asset. He added that if there are any regulatory inconsistencies, there could be ripple effects which would end up creating loopholes and undermining the efficiency of the rules in the long run.
He also touched on the prospect of countries simply banning the asset, adding that an outright ban would be ineffective and difficult to set in motion. He asserted that Libra is an innovation, and just as it is with every other innovation before it, simply banning it is impossible.
Yamaoka’s take is especially refreshing, as it takes a bit of a deviation from the norm. Many who have spoken ill about Libra have continued to connect it to Facebook and the company’s chequered past with data handling and privacy. At this point, it seems that no one wants to discuss the impact that it could have on the global economy, and everyone is just focusing on bashing the asset out of spite for Facebook.
Privacy issues dominated the hearings at both the U.S. Senate and House of Representatives, and while this isn’t insignificant in any way, it remains a fraction of what people could be concerned with.
The former Bank of Japan executive is also right about the potential impact of global regulations. Painful as they may be to implement at this point, enforcing similar rules in every country will mean that governments would be creating a laid-out blueprint for Facebook and Libra should operate, and it will help with ensuring the coordinated expansion of the asset as well. It would also improve adoption, with many around the world feeling more secure and looking to buy cryptocurrency.