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Cryptocurrency analogue of SWIFT system has been creating in Japan, IMF report on the decline of era of cash and deposits. Violent disputes around Libra led to a fall in Bitcoin prices.
Japanese authorities have received approval from FATF to create the global payment project similar to the existing SWIFT. The main feature of such initiative is the use of cryptocurrency and blockchain, which will fundamentally improve the throughput and reliability of information storage.
According to Reuters, the initiative development will be followed by the Financial Action Task Force on Money Laundering Group (FATF). It was this International institution of power of the world's largest countries that at the G20 meeting they decided to appoint as the main cryptocurrency projects’ controller.
The Japanese project was initiated by the Ministry of Finance and the Financial Services Agency. However, these agencies have so far refused to comment on the creation of the global cryptocurrency network. If it becomes SWIFT competitor, it can be called a small revolution in the global financial system.
The Society for Worldwide Interbank Financial Telecommunications (SWIFT) was founded in 1972 for international payments. Now it unites more than 11,000 credit institutions from 200 countries. The main office is located in Brussels; the daily turnover reaches 30 million transactions.
Such initiative of one of the largest world economies is a frank challenge to the existing financial system. The authorities of several countries believe that it is impossible to ignore cryptocurrency and blockchain boom.
For example, laws on cryptocurrency should appear in France within a month; the Canadian authorities also announced the stepping up of new technologies study. However, the countries that first legalized Bitcoin were among the leaders. It was Japan that once again beat the competition.
A document published by the International Monetary Fund, which was named The Growth of Digital Money, reports increased competition between FinTech companies and traditional lending institutions. Moreover, it seems that new settlement technologies are increasingly replacing classical institutions via the active use of stablecoins and blockchain.
According to IMF researchers, cryptocurrencies with a fixed rate are more convenient for the consumer during the calculations. However, there is an issue here. It lies in the fact that new financial asset requires an intermediary. Someone has to ensure that $ 10 invested in stablecoin can always be withdrawn and got back in the same amount of $ 10.
Some critics refer the International Monetary Fund to the cryptocurrency supporters. In particular, IMF was the first official community to recommend the launch of central bank cryptocurrency; this happened back in 2016.
IMF gives banks its recipe for the way to win the competition. In order to do this, it recommends them to use electronic money (i-money). Libra tokens are considered to be the most striking example of such coins in the fund. Although the controversy surrounding Facebook project does not subside, its concept is well received by many representatives of financial industry.
The report pays great attention to the role of central banks. According to IMF, it is the state that should provide settlement services to stablecoins suppliers. Such a partnership will ensure maximum stability of the financial system. Commercial organizations will deliver services to the end user, and the state will guarantee security.
This mechanism can be launched by the Central Bank by starting to issue its own cryptocurrency. Previously published IMF report discusses on the state stablecoins occurring in the near future.
The ongoing controversy surrounding Libra project leads to sharp fluctuations in cryptocurrency rates. Congressional harsh attacks on Facebook resulted in 12% drop in bitcoin price. However, the next meeting of the Financial Services Committee of the House of Representatives was more successful resulting in quotations increasing by 3%.
US lawmakers have quite negatively perceived the fact of the emergence of new financial asset. David Marcus, the Head of Calibra, had to answer highly unpleasant questions at the hearing. In particular, Senator Sherrod Brown demanded to clarify whether the company will be able to take full responsibility for new cryptocurrency by Facebook, and how it will counteract the fraudsters. There were also complaints on the protection of users’ personal data.
Facebook already had problems with keeping users’ confidential information. Hackers have repeatedly found loopholes that resulting in data leakage to open access.
David Marcus’ strongest reciprocal argument was as follows: if Libra project was banned, its analogue would still appear. But this time, people with completely different values will launch it in another country. Here it was again stated that Facebook main purpose is to provide assistance to those who are deprived of the opportunity to use traditional financial services.
Gary Gensler, the former CFTC Chairman, just before the meeting stated that SEC should deal with stablecoin regulation. Olaf Scholz, the current Head of the Ministry of Finance of Germany, urged to carefully study Facebook initiative and do everything to ensure that Libra stablecoin could not compete with euro. Otherwise, states will lose their ability to control economy through monetary mechanisms.
It seems as if the authorities of different countries will find it very difficult to agree on the creation of global cryptocurrency. Therefore, they decided to create an international working group under the auspices of the Group of Seven. It is already clear that cryptocurrency is changing modern financial system, and Bitcoin was the first to do it having no borders and nationalities.