FB Libra Would 'Discipline' Gov'ts With Weak Economies: Ex Central Banker

Any country seeing widespread use of Facebook's proposed Libra digital currency could find that its central bank monetary policy is severely undermined.

"The emergence of Libra would pressure policymakers to discipline themselves".

Issues are likely to arise "If Libra becomes more widely used than the sovereign currency of a particular country," according to Yamaoka.

While this should not cause too much concern for countries with a strong market trust in their currencies, Libra could trigger or accelerate capital flight in countries where market trust is low.

In either case, he says that "The emergence of Libra would pressure policymakers to discipline themselves," and not do anything to undermine the value of their currencies.

The plan is for Libra to be backed by a basket of real assets denominated in major currencies.

This would encroach on nations' sovereign currency policy, Yamaoka told Reuters.

The only way to guard against such risks is to globally coordinate regulation, as Libra will be a global currency.

Whilst regulation may cause delays to Libra's launch, Yamaoka believes that an all-out ban would be difficult and ineffective, saying "There's no way to stop innovation."

Facebook previously warned investors that Libra may never launch, following pushback from regulators.