Project Libra has managed to garner quite an impressive number of skeptics in a rather short span of time. While the majority of regulators around the globe are straight out banning Facebook’s ambitious digital currency, governor of Bank of England, Mark Carney, is reportedly defending the platform’s choice to create a new currency.
It has been a tumultuous two weeks for the social media titan and its crypto endeavor, project Libra, as the support for the forthcoming stablecoin continues to wither away. Facebook has so far been unsuccessful in its attempts to appease regulators for Libra, which has cost the project the support of some key backing companies.
With six of the 28 original members of the Libra organization parting ways with the project before its launch, Carney’s defensive remarks come as a breath of fresh air for Facebook. According to the Canadian news outlet TheStar’s report, Carney highlighted the inadequacies of the current financial system while supporting the social media platform’s venture.
Carney believes that it is because of the inefficiency and shortcomings of the prevailing payments system, that firms like Facebook should be involved in projects like Libra, which have the potential to reshape and revolutionize the financial ecosystem for the better.
Per the report, lawmakers posed a rather redundant question, why firms like the social media company should be getting involved in such projects given the associated risks. In response, the Governor highlighted several key factors that are weighing the financial system down, high transaction costs being one of them.
Carney pointed out that high costs tied to moving money across borders are penalizing the involved parties and are more cumbersome for especially small businesses because debit payments can cost firms as much as 200 basis points per transaction.
In addition to being uneconomical, they are also highly inefficient, as the transactions take too long to be completed. In this day and age, Carney believes that just isn’t good enough; those payments should be instantaneous. He further continued:
It should be the same as us exchanging a banknote online. It should be virtually costless and it should be 100 per cent resilient.
Carney admitted that the prevalent problems plaguing the current traditional financial system could be solved in multiple ways. However the challenge, according to him specifically for the United Kingdom is to bring online payments and other payments up to the standard that is found in a number of major emerging economies and a few advanced economies around the world.
While Carney clearly believes that the current system is in need of a total makeover, he isn’t one for sidestepping regulations. When it comes to new developments, he emphasized:
It’s either going to be regulated properly, overseen properly, or it’s not going to happen.
He even warned the companies (read Facebook) that are invested in tackling the traditional problems that developments, especially in the financial space, are subject to deep scrutiny by authorities, as they should be. He further continued:
In terms of how this will proceed or not going forward, this will not be like social media. This will not be a case where something gets up and starts running and the system tries to work out after the fact how it’s regulated.
The Governor of the Bank of England has been quite involved and active in the conversation about transforming the global financial system. In fact, earlier in August, Carney shared a transformation suggestion, which was replacing the United States dollar with a digital currency similar to Facebook’s Libra.
Carney’s consistent support of Libra might imply that he might be bullish for the upcoming stablecoin. Who knows? He secretly might be but he demands perfection at the scale that Libra will be operating at. Back in July, while stressing upon how Facebook’s crypto has to be virtually perfect at the outset, he reportedly said:
It’s either successful or it isn’t. If it’s successful, it becomes systemic, because it would involve a very large number of users. And if you’re a systemic…you have to be on all the time. You can’t have teething issues. You can’t have people losing money out of their wallets.
Libra might have its fair share of opponents but the cryptocurrency has successfully managed to start a conversation amongst central banks worldwide regarding digital currencies. Only recently in an interview, the head of Sweden’s Riksbank characterized Facebook’s Libra project as “an incredibly important catalytic event” that is urging the world’s central banks to brace themselves for the inevitable digital transformation.