The Monetary Authority of Singapore (MAS) recently held talks with Facebook regarding its ambitious cryptocurrency project that it announced just recently. This is not a green signal by the regulator as there are some regulatory issues that need to be solved first. It seems the way for Facebook’s cryptocurrency Libra just isn’t free of its obstacles.
The Managing Director of MAS, Ravi Menon, said at a media briefing regarding the situation:
The key challenge is to figure out the nature of the beast…What it is more like and which box we can put it into. At this point we are not sure yet.
Ravi has pointed out that the concerns that are being raised regarding Facebook’s Libra are “not trivial”. The issues that are there revolve around the primary aspects of security and privacy. The uncertainty about Facebook’s Libra is not just limited to Singapore only, concerns are being raised in other places as well. Although the concerns seem valid, there is a natural inclination of banks to go against crypto. Here’s why:
The crypto world emerged out on the global financial scene after the global economic crisis of 2008. As the debt-based banking system crashed across the globe and businesses went bankrupt, issues embedded in the centuries-old system of banking became evident to the people.
Amid this fiasco, people started to look for alternatives to it. Capitalizing on the slight rebellious attitude towards the banks, bitcoin came to the scene. It provided the world a decentralized, internet-based peer-to-peer monetary system.
Unlike banks, there is no central party controlling the network but instead, the control is put in the hands of the people and anyone can participate to maintain the network by acting as a node. This rebellious nature puts bitcoin and cryptos in direct competition with the banks and fiat as its staunch proponents largely claim that blockchain-based financial system will replace fiat in the future.
This anti-fiat vibe thus naturally inclines banks to go against the crypto world with Facebook’s Libra being one of its children as well. Bitcoin is the main threat to banks in this regard. bitcoin is public blockchain-based crypto which progresses the idea of eliminating the expensive, centralized and debt-based banking system from the world by giving an alternative decentralized, trustless, transparent and open monetary framework. With bitcoin, the trust is not put in a central authority, rather it is put in code and mathematics.
Although Libra is not a pure cryptocurrency since it has multiple pegs with fiat and is not fully decentralized, it still is a tool built on blockchain technology, the same technology lying underneath the entire crypto world, which can drive up adoption of other cryptos along with itself.
Finally, the negative connotation attached with cryptos also come in the form of their illegal usage. Though the promises and prospects that cryptos bring are revolutionary in the form of cheap, global and fast monetary frameworks, yet their usage in illegal activities like money laundering, usage in the dark web etc. put a stain on their utility. Besides, many investors have also been scammed in the crypto world.
This is why the major concern of the regulatory bodies like MAS all across the globe is the protection of the people. Until regulatory clarity is achieved regarding Libra’s economic framework and SOP, concerns will be raised about its deployment globally.
Ravi also pointed out that the current picture regarding Libra’s working mechanism isn’t completely understood yet. Until banks are sure of the regulatory aspects of Facebook and the security of people all over the world, it is going to be a tough time for Facebook’s beloved Libra.