Why the U.S. Federal Reserve May Never Green-Light Facebook’s Libra
The United States Federal Reserve Governor, Lael Brainard has highlighted the major reasons why the nation’s financial authorities still feel reluctant to greenlight Facebook’s Libra global stablecoin project. Speaking during a central bank conference in Frankfurt Germany, Brainard hinted that regulators are concerned that Libra could gain global adoption within a short while and potentially overthrow the dollar as a unit of account, reports Ledger Insights on December 19, 2019.
U.S Federal Reserve Wary of Libra
It appears Facebook’s quest to revolutionize the world of payments with distributed ledger technology (DLT) and reduce the number of unbanked people in the world via its Libra stablecoin, may never achieve the desired result.
In the latest development, the U.S. Federal Reserve Governor, Lael Brainard, who also functions as the chair of the Committees on Financial Stability, as well as Clearing and Settlements, has revealed the key reasons behind the government’s refusal to give Libra room to operate.
During a central bank conference held in Frankfurt Germany, in honor of Benoit Coeure, the outgoing director of the European Central Bank (ECB), Brainard made it clear that financial regulators are worried that if Libra is left unchecked, the stablecoin may quickly gain adoption globally and transform itself into a new unit of account within a few years.
A Huge Threat
To back her claims, Brainard highlighted the rapid pace at which the tech space has grown, with the internet reaching an impressive 80 percent penetration in the United States in 13 years. She also talked about how new digital payments systems including Venmo, Alipay, and WeChat have grown exponentially in just five years.
With a massive 2.45 billion daily active users, Brainard firmly believes that Facebook will pose a more significant threat to the existing traditional financial ecosystem as compared to other digital payments platforms, “since the utility of any medium of exchange increases with the size of the network using it,” she said.
What’s more, Brainard also addressed worries about consumer financial security, as the menace of hacks and heists still remains an unsolved mystery for crypto market participants, with the total amount of bitcoin (BTC) and altcoins stolen by bad actors estimated at over $4 billion in 2019 alone.
In related news, earlier in December 2019, the Financial Services Board (FSB) also echoed the same sentiments with Brainard, stating categorically that the entry of large tech firms like Facebook into the payments ecosystem could bring about financial instability, and as such these firms must not be allowed to thrive.