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Editorial: Deepen debate to control crypto-assets by taking their risks into consideration

  • October 24, 2019
  • , The Japan News , 7:35 p.m.
  • English Press

here is a risk that conventional monetary and settlement systems will be shaken. The international community should share this awareness and deepen discussions of regulations.

 

The crypto-asset or cryptocurrency named Libra, the issuance of which is planned under the initiative of Facebook Inc. of the United States, is facing ever stronger headwinds.

 

During their recent meeting, finance ministers and central governors of the Group of 20 major economies shared the view that Libra should not be issued until problems over how to regulate and supervise it are resolved. This can be said to be a reasonable judgment because various concerns have been pointed out regarding the plan.

 

Facebook must seriously accept the fact that the advanced nations and regions of Japan, the United States and Europe, as well as emerging countries, have aligned with each other over their handling of the cryptocurrency.

 

Major credit card companies, including Visa and Mastercard, have decided not to join the Libra issuance plan. They likely took into consideration the criticism swirling around the venture.

 

Libra is different from ordinary crypto-assets, for which prices fluctuate radically because they are subject to speculative investment. It is assumed that fluctuations will be restrained by using legal currencies such as the dollar, yen and euro as backup assets, thereby making it possible to use Libra for remittance and for payment and settlement. It is possible Libra could spread widely as Facebook has 2.7 billion users across the world.

 

The government of a country and its central bank manage economic and monetary policies through the issuance and administration of its currency. This system will collapse if digital currencies, which cannot be controlled by states or international organizations, circulate in large quantities.

 

Countries have every reason to feel that the emergence of cryptocurrencies poses a challenge to monetary order. The idea of the circulation of a cryptocurrency like Libra prevailing across the globe can be regarded as unreasonable.

 

Compilation of rules crucial

 

Due to users being assured a great deal of anonymity, it is feared Libra could be used to finance terrorist activities and tax evasion, in addition to money laundering.

 

In a statement it released after the meeting, the G20 warned that crypto-assets will give rise to a set of serious risks such as being used for illegal purposes. Finance Minister Taro Aso told a news conference that even if it is possible technically, it does not necessary mean it can be trusted.

 

To protect the assets of their people, countries have spent a great deal of money and time to build safe networks for payment and settlement and monetary systems. Given the fact that the personal data of as many as 87 million Facebook users was leaked, the G20’s concern is understandable.

 

The trend toward the emergence of new digital financial services brought on by technical innovations is expected to accelerate without being limited to this one involving Libra.

 

Who will supervise them and how? How will the users of such services be protected when irregularities occur? The G20 countries need to join hands and accelerate their efforts to work out regulations that fit the current age, in which information technology is applied to financial services. Measures must also be implemented to prevent abuse of new technologies, including one for the identification of users.

 

The fees currently charged for handling international remittance are high, and the speed of operations is slow. Such discontent is behind the exploration of Libra. Financial institutions are called on to work toward improving their services.

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