The Bank for International Settlements (BIS), considered to be the central bank of central banks, has warned that Facebook's planned cryptocurrency project, Libra, could harm the banking sector.
The BIS published a report on Sunday, saying that big tech companies such as Facebook, Amazon and Google could "rapidly establish a dominant position," thanks to their extensive network of users. While these companies can enhance financial inclusion, they could also present threats to financial stability, competition and data protection, the BIS said.
Regulators around the world, therefore, would need to coordinate to ensure "a level playing field between big techs and banks." They would also need to take a "more comprehensive" approach that draws on financial regulation, competition policy and data privacy regulations, the BIS said, adding:
"The aim should be to respond to big techs' entry into financial services so as to benefit from the gains while limiting the risks. As the operations of big techs straddle regulatory perimeters and geographical borders, coordination among authorities - national and international - is crucial."
Facebook, along with 27 founding partners, unveiled a plan for a "low-volatility" cryptocurrency called Libra last week, intending to serve the unbanked and facilitate low-fee money transfers globally. Libra is expected to go live sometime next year, but it has already faced scrutiny from central banks and politicians around the world. For instance, Markus Ferber, a German member of the European Parliament, warned that Facebook could become a "shadow bank" and said regulators should be vigilant.