Facebook’s Diem and other cryptos under fire from BIS GM
The General Manager of BIS, Agustin Carstens, has warned that private cryptocurrencies like Facebook Diem and others can concentrate a lot of the market power into the hands of a few private players putting the financial ecosystem at risk.
This has been the general tone used by many large regulators nowadays when dealing with the idea of cryptos and stablecoins over the last couple of months. While they are clear that they cannot stop the growing popularity of cryptos and have come around to the idea that they need to co-exist within the financial ecosystem, the fact that they have no control over the private cryptos has been gone down well with the regulators and rightly so as well. So, they are looking to regulate the private cryptos and trying to ensure that they do not get out of hand.
Facebook has been in the news for the whistleblower allegations and the outage that it suffered for a few hours and it is clear that regulators and authorities feel the need to ensure that Facebook does not become too big to control. Already, its reach extends far beyond the borders of the US and it has been affecting the way the world works and all this must be monitored closely. The increasing power of Facebook has rattled the authorities as they believe that it would acquire even more power and control when it is allowed to issue its crypto token as it can then easily take it to the masses with not much responsibility for its actual usage.
Agustin also pointed out the risk of bringing in a fragmented payment system that the cryptos would foster and that could pose a big threat to the goodwill that traditional payment systems have built up over the years. Once Facebook brings in Diem and makes it a currency that is inter-operable within its network, that would be akin to a separate financial ecosystem by itself which would pose a threat to the real-world ecosystem and increase the complexity of how they inter-operate.
“In this type of scenario, stablecoins could erode a jurisdiction’s monetary sovereignty and its unit of account through ‘Diem-isation’,” said Carstens.
To offset some of these risks, the central banks are in a race to bring out a digital version of their fiat currencies so that they can bring in a sense of competition to the cryptos and push users to opt for the regulated CBDCs when given a choice.
