The Reserve Bank of Australia (RBA) has raised doubts that Australians will bother using Facebook’s cryptocurrency Libra when it is released.
In its recent submission to the Senate Committee on Financial Regulatory Technology, the RBA said it is “unclear” about the role Libra will play in the Australian economic landscape.
“Australia is already well-served by a range of low-cost and efficient real-time payment methods, such as the NPP, that utilise funds held in accounts at prudentially supervised financial institutions,” the RBA said.
“Moreover, while Australians may not have been well-served by banks providing cross-border payment services in the past; a number of new non-bank digital players have entered the market in recent years offering significantly cheaper and faster money transfer services.”
Unlike Bitcoin – which has high volatility that can be traded on for potential significant gains – Libra is a ‘stablecoin’ meaning it will be backed by a reserve of assets that aims at improving investor confidence by reducing volatility.
The RBA mentions that stablecoins, while great for cross-border transfers, bring risks around “consumer/investor protection, data privacy, monetary policy, and financial stability”.
“A key consideration for regulators is to ensure that private sector stablecoin initiatives operate under a comparable regulatory regime to existing payment systems, and in particular, that they do not fall outside the existing regulatory framework,” the RBA said.
Libra is planned for launch around the middle of this year and is expected to be fully-integrated with Facebook’s ecosystem of services like Whatsapp, Messenger, and Instagram.
Before release, it needs to jump through the appropriate regulatory hoops – a task that is proving difficult for the ambitious cryptocurrency.
Facebook made a poor impression with Australian regulators after the surprise announcement of Libra, and subsequently failed to answer specific questions put forward by the likes of ASIC and the OAIC.
France and Germany have also said that Libra fails “to tackle the challenges raised by cryptocurrency and so-called stablecoin projects”, while a G7 report – cited by the RBA – told international regulators that “no stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks are adequately addressed”.
While the RBA and regulators remain skeptical, over half the Australian population regularly uses a Facebook product in some form, which could point to widespread adoption of Libra – as long as the cryptocurrency can get passed the regulatory gatekeepers.