While most of the criticism of the upcoming Libra token focuses on its possible use for money laundering activities, there have also been claims that it could undermine the economic independence of several regions it will be used in and this because the token will be one of the most uses cryptocurrencies upon launch and there is concern that its ease-of-use and accessibility will make it preferable to traditional means of finance. While Facebook has denied that there will be this effect, these allegations continue to rage on as well as spark discussion about the future of world economies.
According to a September 30, 2019 report, banks under the Federal Advisory Council (FAC) also share the sentiment as there is worry that Facebook’s Libra will create a shadow banking system and economy that will work directly against those already put in place.
These new sentiments were expressed after the federal reserve in the United States reached out to banks and asked them what they thought of the Libra token. Most expressed concern that the launch of the new token will lead to decline in demand deposits accounts as well as bank volumes and this is because the Libra token will be linked to Facebook platforms such as messenger and WhatsApp and will not require any intermediary banking for the consumer and as such, they will be able to send funds seamlessly and with very little restriction.
A quarterly meeting for the FAC was held in September 2019 and there it was also discussed that’s the use of stable coins such as Libra and other cryptocurrencies pose a threat to the current banking model that is built on privacy. It has been estimated at 52% of the 170 million people that live in the United States are active Facebook users and this means that the use of libra could create a shadow banking system that exists outside of traditional banking.
“As consumers adopt Libra, more deposits could migrate onto the platform, effectively reducing liquidity, and that disintermediation may further expand into loan and investment services,” it was stated.