home Altcoin News, Bank of Japan, Cryptocurrency News, facebook, Libra, News Central Bank Crypto Could Damage Entire Economies, Warns Bank of Japan

Central Bank Crypto Could Damage Entire Economies, Warns Bank of Japan


The deputy governor of the Bank of Japan, Masayoshi Amamiya, has warned that the creation of crypto by central banks could have a negative impact on economies, Reuters reports.

According to Amamiya, Central Bank Digital Currencies (CBDCs) had the potential to take away the credit channels of commercial banks if they managed to replace private deposits. Consequently, this would impact the economy negatively since commercial banks would be rendered unable to borrow and by extension, lend:

If central bank digital currencies replace private deposits, that could erode commercial banks’ credit channels and have a negative impact on the economy.

Perils of forcing central bank crypto on the people

BoJ’s deputy governor also criticized the idea that the effectiveness of policies of pursuing negative interest rates could be enhanced by the issuance of CBDCs. Per Amamiya, issuing CBDCs and then slapping negative interest rates on them would lead to individuals and businesses opting for cash to avoid the cost charged on holding CBDCs.

While central banks still had the option of getting rid of cash in order to ensure this, it would not be ideal for the citizenry.

Additionally, Amamiya also warned firms that are planning to unveil cryptocurrencies must comply with anti-money laundering regulations. In his remarks, Amamiya singled out Facebook saying that because of the huge potential user base across the globe, its cryptocurrency could have a big impact around the world.

BoJ not alone

The wary approach adopted towards Facebook’s cryptocurrency Libra is not limited to the Bank of Japan. Days after Libra was announced, the governor of the Bank of France Villeroy de Galhau warned that the digital currency would increase money laundering risks due to the relative anonymity offered. Consequently, Galhau stated that Libra must follow anti-money laundering regulations.

Additionally, Galhau indicated that if Facebook intended to provide banking services like traditional financial institutions then it would have to be regulated like banks.

Not many likes for Facebook crypto among central bankers

A similar sentiment was echoed by the central bank of central banks, the Bank for International Settlements (BIS) shortly after Libra was announced. At the time, BIS warned that Libra could negatively impact the international banking system by undermining its stability.

Additionally, the BIS cautioned that digital currencies such as Libra which had the potential of attracting billions of users across the world could reduce competition while introducing data privacy issues.

The Bank of England has also weighed in on Libra with its governor Mark Carney stating that Facebook’s crypto will be subjected to the ‘highest standards of regulation’. While adding that regulating Libra would require the coordinated efforts of various international bodies such as the IMF, the BIS and the Group of Seven, Carney said that their approach would involve keeping an ‘open mind, but not open door’.





Source link

Leave a Reply

Your email address will not be published. Required fields are marked *