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Blocktempo.com reported that the South Korean financial regulator, the Financial Council of the Republic of Korea (FSC), claimed that Facebook's Libra, which is expected to be launched in 2020, would threaten the stability of the Korean financial system.

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Image from Yahoo Finance

FSC released a new trend report on July 5th, which raised further questions about the possible problems of “If the world's 2.4 billion Facebook users transfer one-tenth of their bank deposits to Libra”. The FSC emphasizes that this report is intended to promote the country's media understanding of overseas financial trends, rather than the official opinion of Libra.

For the traditional banking industry, the birth of Libra is definitely a threat because it will jeopardize the profit model of the entire bank.

If companies such as Facebook choose to take the Libra project's client funds to buy bonds instead of depositing them, the financial situation of traditional banks may worsen; and if Libra can provide near-free cross-border payment services, The remittance fee income of several trillion won of Korean banks will be greatly reduced.

The FSC also pointed out that if Libra is not under a certain degree of bank regulation, it is likely to cause the currency to flow into money laundering crime tools. The report adds: "Goldman Sachs and JPMorgan, such as large financial institutions, Has announced his refusal to participate in the Libra project."

As people abandon the legal currency and turn to Libra, which will lead to a large amount of funds being transferred overseas, not only will the bank's repayment ability be weakened, but the loan reserve will also decrease; in addition, it may also cause a run-up during the financial or foreign exchange crisis.

Libra's ability to streamline transactions and cross-border payments will also weaken the central bank's ability to control capital flows; plus, if the legal currency issued by the central bank is widely converted into Libra, the enforcement of monetary policy will also be limited.

However, FSC also admitted that the Libra project has succeeded in providing financial services through Facebook, as well as the company's social media networks such as WhatsApp and Instagram, which can maintain the convenience and price competitiveness of its products. The possibility of commercialization is very high compared to other cryptocurrencies.
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