Facebook's stablecoin Libra, scheduled for launch in 2020, may carry risks for the global financial system, US and world regulators fear.

The Bank for International Settlements (BIS) published a report warning of Libra’s risks posed to the international banking system. BIS recognizes that the entry of large technology companies, such as Facebook, Amazon and Alibaba, into the financial services market can facilitate the emergence of new financial technologies, such as speeding up transactions and reducing their cost, especially in developing countries.

“The role of Big Tech in finance introduces very many new and very unfamiliar elements which pushes us to take a fresh look at some of the activities that international policymakers engage in,” said Hyun Song Shin, economic adviser and head of research at BIS. “This is something that needs attention sooner rather than later.”

But at the same time it can undermine the stability of the banking system, which has just recovered from the 2008 crisis.

Despite the potential benefits, the emergence of digital currencies outside the current financial system can reduce competition and create data privacy problems. Therefore, global central banks need to be able to quickly respond to the emergence of such tools.

“The aim should be to respond to big techs’ entry into financial services so as to benefit from the gains while limiting the risks,” Shin said. “Public policy needs to build on a more comprehensive approach that draws on financial regulation, competition policy and data privacy regulation.”

US authorities also demonstrate concerns over future Libra launch. Two hearings are scheduled for 16–17 July. One of them is to take place in the Senate Banking Market Committee and the second one to be held in the House of Representatives Financial Services Committee. During the hearings, lawmakers plan to figure out what the consequences for the US financial market can bring cryptocurrency from such a large corporation as Facebook is.

Furthermore, the British Financial Market Supervision Authority stated that Facebook should not be allowed to run its own cryptocurrency until regulators complete a full analysis of this financial instrument.

Previously the risks of Libra were voiced out by Facebook co-founder Chris Hughes. According to Hughes, who is now co-chairing the Economic Security Project, Libra could lead to the transfer of control over monetary policy from central banks to private companies.

“If global regulators don’t act now, it could very soon be too late.”