Commercial Banks Stay Away from Facebook’s Libra Currency Project
The aim of Facebook to build an international payment system has not appealed to commercial banks, which seek their own fintech solutions.
Facebook’s offer to create an international payment system leaves commercial banks cold, commented the Financial Times. Banks, in general, have been cautious in testing older digital assets, including Ripple’s XRP, Stellar, and other networks offering the potential for international remittances.
However, despite the numerous partners joining the Libra Association, the opinion of commercial banks is not formed yet, and mostly skeptical.
“We’re still learning what it is and trying to work out where we stand on it; are we an opponent, partner or do we ignore?,” said a person familiar with the approach to the project of one of the world’s biggest banks.
The sentiment of commercial banks follows skeptical statements by central banks and financial regulators. Facebook’s Libra is not launched yet, but there are already predictions the asset could be used to deplete banks, and create a grey economy of its own, bypassing regulations.
Until now, assets aiming to disrupt the banking sector have not faced similar criticism. But Libra’s connection to Facebook adds on previous concerns about privacy, data gathering and tracking.
Despite the fact that Facebook will not run Libra on its own, and block production will be the task of the Libra Association, the social media giant will produce one of the wallets, Calibra. A recent outage of some of Facebook’s services also added to concerns about the reliability of the tech giant, and of the repercussions of a global payment system breaking down.
Economist Joseph Stiglitz also commented on the potential of Libra to create a legal hassle worldwide. On the positive side, he believes Libra can bypass money intermediaries and offer lower fees for transfers. But the new asset can also serve as an informal channel of payments, bypassing capital controls and tax systems.
“The last thing we need is a new vehicle for nurturing illicit activities and laundering the proceeds, which another cryptocurrency will almost certainly turn out to be,” commented Stiglitz.