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As expected, the Financial Action Task Force (FATF) standards released Friday include a controversial requirement that “virtual asset service providers” (VASPs), including crypto exchanges, pass information about their customers to one another when transferring funds between firms.
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France is creating a G7 task force to study how central banks ensure cryptocurrencies like Facebook’s Libra are governed by regulations. Governor Francois Villeroy de Galhau said the task force would be led by Benoit Coeure, a ECB board member.
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Were every Western depositor to move a tenth of their bank savings into Libras, its reserve fund would be worth over $2trn, making it a big force in bond markets. Banks that suddenly saw lots of deposits leave for Libras would be vulnerable to a panic over their solvency; they would also have to shrink their lending. And the prospect of huge sums flowing across borders will worry emerging countries with a fragile balance of payments
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Individual Libra-holders face risks. One is currency fluctuations. If, say, the yen rises against the basket to which Libra is pegged, Japanese holders of Libra will lose out. The new currency will not yield interest (though neither do many bank deposits nowadays).
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We need a product that fully disrupts the woefully inefficient global payments system and starts to break the power of the big banks. If Libra launches (the regulatory challenges are not small) and works as a frictionless, almost free and very fast global monetary transmission mechanism, it could be that product. However if it is, it won’t be because it is mimicking “real” cryptocurrencies. It will be because it isn’t.
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One idea as to how officials might keep CEO Mark Zuckerberg’s dreams grounded in reality is to get under the hood of what goes into the digital currency in the first place. Given Libra wants to back every digital cent with a mix of real-world reserve currencies, that might be the best place to start. Bank of England boss Mark Carney hinted at this in his Mansion House speech on Thursday, proposing that tech firms and other non-banks be allowed to hold funds directly at the central bank.
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In many respects, he says, Libra is like an ETF for a basket of currencies, except that Libra will not trade on regulated exchanges. In fact, it is so much like an ETF, the US SEC is likely to at least contemplate asserting jurisdiction over the tokens.
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SWIFT: “We don’t think that cross-border payments challenges should be solved for with closed loop systems. Doing so would easily solve for a subset — or multiple subsets — of participants, but value needs to move everywhere — from every account, to every account. Loops create barriers and friction; they reduce fungibility and portability, they limit competition and they fragment liquidity.”
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What happens if all users want to sell their Libra currency at once, causing the Libra Reserve to hold a fire sale of assets? If the Libra system becomes intertwined in our global economy in the way Facebook hopes, we would need to consider a public bailout of a privately managed system.
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Simply put, the Libra Masterplan is a combination of the Bitcoin Playbook (to allow the currency to spread globally without regulatory responsibility) and the WeChat Playbook (to harvest as much data as possible and earn as much ad revenue as possible by introducing money into a popular chat app).
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“What are they doing with the money, if I give them some dollars to buy the Libra, they’re kinda being fuzzy about that in their whitepaper…The strength of the collateral is a question I would have about it.”
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“A liquid, stable currency would be attractive to many in emerging markets. So attractive, in fact, that if enough people trade out of their local currencies, they could threaten the ability of emerging market governments to control their monetary supply, the local means of exchange, and, in some cases, their ability to impose capital controls.”
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Russian government-owned news agency TASS has reported that Russia will not legalize Libra.
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Open X refers to a new operational age where the financial services industry is moved onto a shared ecosystem or marketplace. In this new paradigm, players leverage data extensively and collaborate with other players to provide customers with a seamless experience.
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Canada’s largest credit union and one of the world’s biggest banks, announced a security breach caused by a former employee. The bank said a bank employee had taken the data of 2.7 million home users and 173,000 businesses and associated contacts from its database, without authorization.
