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The Facebook plans to operate its own digital currency that which poses risks to the international banking system and this should trigger a speedy response from the global policymakers, that which is according to the organization that represents the world’s central banks.
This move of the so called big tech firms such as the Facebook, Amazon and Alibaba into the financial services can speed up the transactions and can also cut the costs, especially in the developing countries across the world, this move can also undermine the stability of the banking system which has just recovered from the 2008 crash.
There are many Echoing warnings from many of the tech experts, such as the Bank for the International Settlements (BIS) has said that there are many potential benefits to be seen, by adopting the digital currencies outside the present financial system which can reduce the competition and also create the data privacy issues.
Hyun Song Shin, who is the economic adviser and head of research at BIS has said that the aim of this move should be to respond to the big techs’ entry into the currency financial services so as to benefit from the gains and limiting the risks, he has also said that, The Public policy needs to build on a more comprehensive approach that which draws on the financial regulation, competition policy and the data privacy regulation.
Chris Hughes, who is the co-founder of Facebook, has also added his voice to the concerns being expressed over the big tech’s move into the finance services, saying that the Libra can shift the power into wrong hands.
Hughes, the co-chairperson of the Economic Security Project, and also an anti-poverty campaign group, has warned that “Even though if Libra is modestly successful, it would hand over much of the control of the monetary policy from the central banks to the so called private companies. If the global regulators do not respond or act now, then it can be very soon too late.”
Shin has expressed that the policymakers need to consider on whether the current system, which is allowing banks to charge more and build up a reserves to protect themselves at times of crisis, was preferable to be more in a competitive system where the transaction costs were lower but the resilience of this financial system is less well known.
The lure of a greater competition between the rival digital currencies can be proved illusory if the projects like the Facebook’s Libra will become dominant across the world.
He has also made a point to the policymakers to coordinate their efforts to make sure that the new systems were regulated to protect the customers and to prevent them facilitating from money laundering.
Apart from these warns, striking to a more positive note, the Bank of England has cautiously welcomed the advent of this digital currency saying it will not only develop its own but rely on the tight regulation of private sector initiatives too. May be the launch of Libra in 2020 can calm down these Echoes.
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