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Libra May ‘Bash’ Governments with Weak Economics: Ex BOJ Banker |

Since its launch, Facebook’s Libra has caused jitters among governments, central banks, and regulators. Many opinions have come up mostly highlighting the potential dangers that the stablecoin poses to the global economic arena.

According to a former Bank of Japan executive, Hiromi Yamaoka, there is trouble ahead. He said that any country that sees widespread use of Libra virtual currency could discover that its central bank’s monetary policy is gravely undermined. Yamaoka oversaw research into digital currencies for the organization. He added that the emergence of Libra will pressure all policymakers to discipline themselves.

According to Yamaoka, issues are likely to arise:

“If Libra becomes more widely used than the sovereign currency of a particular country”

Although that should not cause any insecurity for the countries with a strong market trust in their currencies, Libra may accelerate or trigger capital flight in countries where market trust is low. In either case, Yamaoka says that Libra will ensure that the policymakers do not do anything that may undermine the value of their currencies.

The current plan is for Libra to get backing from a basket of real assets denominated in major currencies. The major fear existing among the policymakers is that any change in the composition of the basket may move markets and considerably affect exchange rates. That would eventually infringe on nations’ sovereign currency policy.

Global Coordination Vital for Risk Reduction

The only way for nations to protect themselves against such risks is to globally coordinate regulation since Libra is set to become a global currency. Yamaoka believes that:

“Any inconsistency in rules among countries creates a loophole that renders the rules ineffective”

Nevertheless, although regulations may delay the launch of Libra, an all-out ban could be ineffective and difficult. Yamaoka believes that there is no way to stop innovation. Facebook recently warned investors that Libra may never launch due to massive pushback from regulators. However, only time will tell how the Libra tale will end.

John Wanguba

John is a content crafter and has experience in writing Forex and Crypto news for FXTimes for over a year. He is also an experienced creative and technical writer, and is usually one of the first ones to publish, discover or cover a scoop. e-mail: [email protected]

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