WASHINGTON (Reuters) - Facebook Inc’s planned cryptocurrency, Libra, could help boost financial inclusion, but also raises concerns about consumer protection, data privacy, and potential “backdoor dollarization,” the IMF’s chief economist said on Wednesday.
Gita Gopinath told reporters the International Monetary Fund was flagging risks and concerns about Facebook’s plans, and said it was important for regulators to pay close attention to such developments.
“It is very important for regulatory agencies in the world to pay close attention to these developments and to make sure that they are not too late in undertaking the right steps,” Gopinath said.
On Wednesday, members of the U.S. House Financial Services Committee are questioning David Marcus, the Facebook executive overseeing the Libra project. Marcus was grilled on Tuesday by the U.S. Senate Banking Committee over the possible risks posed by Libra to data privacy, consumer protections and money laundering controls.
The social media company is seeking to win over Washington after it shocked regulators and lawmakers with its June 18 announcement that it hopes to launch a new digital coin called Libra in 2020.
Policymakers and financial watchdogs in the United States and elsewhere fear widespread adoption of the digital currency by Facebook’s 2.38 billion users could upend the financial system.
Gopinath said the Fund favored expanded financial inclusion, and digital currencies could play a role in that process.
But she said there were also important questions about consumer protection, data privacy, the impact on monetary policy and other issues.
“If you look particularly at countries that are not reserve currency countries, would this lead to backdoor dollarization?” she said. “All of these questions (and) whether there will be enough checks and balances in place to prevent money laundering ... are very important.”
Facebook is one of 28 founding members of the Libra Association which will be headquartered in Geneva and which is in talks with Swiss regulatory authorities about a framework.
Reporting by Andrea Shalal in Washington; Editing by Chizu Nomiyama and Matthew Lewis