Well before the U.S. regulatory agency issues its position, South Korea’s Financial Supervisory Commission showed a negative opinion on Facebook’s cryptocurrency Libra.
It said Libra seeks to replace Bitcoin to become a global digital currency which does not get a government control.
It noted that it is unclear whether Libra would guarantee its value. The commission also said Facebook should issue more details about the digital currency.
It said the emerging economies facing balance of payment deficit would face a severe financial crisis when only 10 percent of their deposits moves to Libra. These BOK deficit economies would face a bank-run, it warned.
Libra would chip away at the profitability of banks, and consumers would be unable to enjoy a wide variety of benefits they enjoy in traditional banking services.
However, Libra has a high possibility of success as a cryptocurrency, the commission said.
Facebook seems to compete with U.S. dollars, Euro, and other global key currencies. It is a stable coin whose value is backed by existing legal tenders, according to Facebook.
Facebook also knows who has how much Libra and where they spent and remitted because Facebook has all the personal details of its users. Thus Facebook subscribers have no privacy on their Libra usage.
Thus, it might take action against money launders or criminal financing. However, it is unclear whether Facebook would cooperate with the regulator for such a financial crime.
Facebook is presumed to have 2 billion subscribers. Once these subscribers use Libra on a full scale, Libra would weaken the power of the U.S. dollar as the world’s largest key currency. However, many analysts prematurely discount the possibility that Libra would replace sovereign currencies.
Libra’s governing body is located in Switzerland. Thus, it might seek to evade U.S. regulatory oversight.
Libra would possibly become popular in underdeveloped countries where people have few access to banking services. Libra would also facilitate global fund transfer because traditional banks charge too many fees on cash transfer. Also, it takes times, a few days to transfer cash from one country to another country.
Libra might work as an alternative a to the pre-paid card as Facebook subscribers buy and sell goods through the Facebook site.