The New Cryptocurrency “Libra”; the Possibility and Risk of the New Digital Currency Area
Sense of alert is increasing by authorities from different countries toward “Libra”, the cryptocurrency created by the American social media giant, Facebook, Inc. A meeting was held on July 16 by the US House Financial Services Committee on the threats of Libra, and also on July 17 by the G7 financial ministers and the central bank governor. Both meetings brought up questions and concerns regarding the management system of Facebook in regards to the illegal usage and leakage of private information, upon agreeing that “concerns and skepticism on money laundering, protection of private information, and asset preservation by users have not yet been resolved”, concluded that “there is a serious issue that needs to be dealt with immediately”.
In response to such concerns and criticisms, Facebook stated that “Libra” will be managed by the “Libra Association” which includes 28 member companies such as VISA, MasterCard, PayPal, eBay, and Uber. Facebook is not in a position to control Libra.”, “The Libra Association will be headquartered in Geneva, Switzerland, where financial authorities will hold responsible for inspections”, “upon putting Libra into service, respective regulations and standards for each country will be met”, and that “there will be no competition held with other countries and currency authorities”, emphasizing the righteousness of its governance and not its denial to not come into any confrontations with existing financial systems.
However, the impact of “Libra” being linked with legal currency, and the fact that there are already 2.7 billion potential users worldwide is huge. Warning bells are ringing on the possibility of the emergence of a new “supranational digital currency”, different from the existing legal currency. If “Libra” accounts are to hold a certain share for payments and remittances, then the value of everything over e-commerce will directly be expressed by the cryptocurrency. Also, the Libra Association headquarters can directly use the legal currencies exchanged with “Libra”. As a result, the credit creation of existing banks will decrease, and the scope of application for the monetary policies will shrink.
Chairman Jerome Powell of the US Federal Reserve Board (FRB) is calling out for “the highest level of regulation towards Libra”. Libra also brings up the concern in the misuse of the cryptocurrency by terrorist financers; therefore there are big challenges for measurements toward cyber security. There is no question that the improvement in technology and revolution of business models hold a certain level of social risks. However, the blind acceptance and unquestioning obedience toward the old system and the current structure are questionable as well. There is a need to investigate the risks and regulations of “Libra”. At the same time, however, it would be interesting to think about the future of currency that is completely in a new dimension than that of the current system, since it’s not like things are currently going perfectly well and are under control anyways.
Takashi Mizukoshi, the President