According to a South Korean financial regulator, recently, Facebook’s unveiled project of Libra cryptocurrency threatens the stability of economic systems.
It was reported that the FSC (Financial Services Commission) of the nation looks at what can occur ‘if 4 billion Facebook users all over the world transfer one tenth of their deposits to Libra.’
Should that situation come about, banks’ solvency would reduce, as would their loan reserves, representing a risk to budding markets from the transfer of the capital out of those nations.
More concerns raised by FSC that bank runs can occur during economic or foreign exchange crises, as many people move their national fiat money to Libra. Libra can be extensively used for money laundering without proper bank-like controls. It added that ‘a big economical institution, like JPMorgan or Goldman Sachs, had refused to take part in Libra’.
As per the report, to the traditional banking industry, the project is a main threat. If a company like Facebook buys a bond as a substitute for making a bank deposit with patron funds, the economic condition of the bank may be worsened. And if Libra permits virtually free overseas payments, the banks of South Korea trillion of won in revenues from remittances would be considerably reduced.
The probability of successful flourishing commercialization of Libra is higher than for other cryptocurrencies. Providing financial services through its social media services like WhatsApp, Facebook and Instagram, with their billions of customers, the firm without any difficulty guarantees convenience as well as price competitiveness.
Moreover, the FSC said that the report is to make possible the understanding of the press and other media on abroad trends and not its official judgment on Libra.