Facebook’s Libra is not Welcome in Australia According to RBA

Reading Time: 2 minutes by Edoardo Vecchio on January 9, 2020 Regulation

The Reserve Bank of Australia has serious doubts about Libra’s success within the nation. In an article published by afr.com on January 9, the RBA sustains that even if it meets all regulatory requirements, there won’t be enough demand for domestic payments in the stablecoin.

The RBA’s Opinion

Even if Libra manages to meet global regulatory requirements, it is unclear if there will be a strong demand for global stablecoins, particularly for domestic payments. This is the opinion of the Reserve Bank of Australia indicated in the submission made to the Senate Select Committee on Financial Technology and Regulatory Technology.

According to the RBA, the digital payment methods available to retail customers are already efficient and there is no need to introduce a new service of this type. The bank specifies that the introduction of a central bank digital currency (CBDC) would not currently have any positive effects either. The RBA claims that existing solutions such as the NPP, which utilizes funds held in accounts at prudentially supervised financial institutions, are able to meet market demand.

The Bank also specifies that its position is not a stance against innovation as there are already a number of Australian fintech entities providing services relating to cryptocurrencies, both as a means of payment and as a speculative asset.

Although the bank admits that Libra could provide quick and secure cross-border payments, these benefits do not outweigh the risks of anti-money laundering, privacy or exchange rate stability as Libra would be backed by a basket of national currencies.

Central Banks are Shaking

The battle of central banks against Libra continues. In this case, the Reserve Bank of Australia would not approve the launch of Libra even if it obtained all possible regulatory approvals. This has some absurdity. If Libra really managed to meet the demands of the various regulators, it would become a financial institution in the same way as a bank and therefore the risks indicated above would not arise, or at least the likelihood of money laundering occurring through this tool would be the same as if it occurred through a bank.

The biggest fear always remains the same: competition. Banks have never had to compete with anyone on the market and thanks to the user base that Facebook could use to launch Libra, the risk of having a competitor within the reach of a central bank is very high.

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