Bank of Japan to keep a close eye on Libra

The Bank of Japan (BOJ) is expressing reservations about Facebook’s cryptocurrency project, Libra.

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An anonymous BOJ official told the Nikkei Asian Review that because financial institutions need to cover the expenses that comes with regulation, Libra will be “be piggybacking for free on a financial system that takes heavy costs." The BOJ Governor Haruhiko Kuroda added he would "keep careful watch" on the project.

Officials also seem concerned that Libra will pose risks to the financial system, as noted recently by the Bank of International Settlements. For instance, if millions of Libra users decided to abandon the cryptocurrency at once and to redeem their cash, it could destabilise the system, the Nikkei writes. Indeed, one of the issues is that the funds used to back Libra will be a “collection of low-volatility assets, such as bank deposits and short-term government securities,” according to its whitepaper. Libra could also theoretically raise the demand for short-term government securities, which in turn, could lower interest rates.

About Author

Isabel is The Block's London and European reporter. She previously reported for Reuters in Madrid and London, following on from her time as a freelance journalist for the Guardian and the New York Times. She has a Bachelors in War Studies from King’s College London and a Master of Philosophy from the University of Oxford. Conflict of Interest: Edward Woodford, the CEO of SeedCX, is Isabel's brother. She does not report on any issues related to Seed or advise other authors in any regard.

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