U.S. Fed Reserve Governor Lael Brainard started a broadside against Facebook’s digital currency project Libra on Wednesday, saying it faces a “core set of legal and administrative challenges” together with clarity about how it would be linked to some basket of underlying assets.
Facebook’s idea of Libra as a “stablecoin” – a digital currency linked to authorities-backed money or other sound assets to avoid the wild variations of pure cryptocurrencies like bitcoin – remains unproven, Brainard stated, with an unclear set of rights for customers.
Her remarks suggest that Facebook’s Libra has yet to gain adhesion among vital regulators. Intended as a consortium of companies that may support the digital currency with hard assets, Libra has faced several difficulties with the withdrawal of major payments corporations like Paypal, Mastercard, and Visa.
Central banks across the world are debating how to handle the advance of digital finance technology, particularly the spread ledger systems utilized by bitcoin. Some analysts feel central banks must ultimately issue digital currencies of their own.
With the potential to lower the fee and up the speed of transmitting money, Brainard stated that the technology does have advantages. However, she mentioned there are also “benefits related to existing arrangements” based on the issuance of physical money.
Cryptocurrencies, she said, nonetheless must clear hurdles along with the possibility of deception and their use for activities like money laundering. Theft and fraud losses associated with cryptocurrencies are considered to have more than doubled to around $4.4 billion this year 2019 from $1.7 billion the year prior, Brainard stated.