Ralph Hamers of ING warns that banks may cut ties with Facebook if concerns about Libra are not fully addressed.

Libra has faced an uphill battle ever since Facebook announced the development of the stablecoin. Lawmakers on both sides of the Atlantic have expressed severe reservations about the upcoming cryptocurrency, with some calling for its development to be halted. Banks are another voice speaking against the crypto. Just a few weeks ago, a number of prominent banks that serve on the U.S. Federal Advisory Council told the Federal Reserve that the launch of the Libra would lead to a “shadow banking” system. Now an executive with ING, the Dutch financial powerhouse, says banks may cut ties with Facebook if concerns over the Libra are not addressed.

Facebook Facing Isolation

The executive in question is Ralph Hamers, the CEO and chairman of the Executive Board of ING. He told the Financial Times that banks were very concerned about Libra being used for money laundering. He noted that banks like ING have a role in acting as a “gatekeeper to the financial system” in order to protect the system.

Hamers says banks would be leery in having a relationship with an entity if money laundering was possibly taking place. As such, a number of banks have said Libra could easily be used for money laundering as there is no current oversight. Hamers told the Financial Times specifically that Facebook would find it harder to find banking partners if the Libra is launched.

He added the caveat that ING is interested in the Libra project, saying that the bank will “take a look and see how this develops.” Hamers added that Libra is a “good initiative to learn with.”

In regards to the money laundering concerns, a Facebook spokesperson said:

As a member of the Libra Association, we will continue to be a part of this dialogue to ensure that this global financial infrastructure is governed in a way that is reflective of the people it serves. Facebook will not offer Libra through its Calibra wallet until the Association has fully addressed regulators’ concerns and received appropriate approvals.

Pot Calling the Kettle Black

It is interesting to see bank executives and government officials wring their hands over the possibility of cryptocurrency being used to launder money. It is true that criminals have used various virtual currencies to launder their ill-gotten gains, but banks have been responsible for money laundering on a scale that far outstrips cryptocurrencies.

Russian criminals used a branch of Danske Bank in Estonia to launder an eye-watering US$230 billion over the course of several years, with Deutsche Bank now being investigated for having a role in the affair. Another bank caught money laundering is Swedbank, which funneled $150 billion through a branch in Estonia. Dutch prosecutors are now conducting a criminal probe into ABN Amro Group NV over money-laundering concerns.

One could be cynical and say that banks are using money laundering concerns to act as a smokescreen for their actions against Libra. A cynical person could point out that banks have control over international payments now and that Libra represents a threat to that control due to near-instantaneous transfers with little comparative cost. Then there is the fact that Libra is expected to impact two billion people who have little to no access to banking services.

To put money laundering into perspective, Danske Bank and Swedbank laundered a total of $380 billion. The entire market cap for all cryptocurrencies is currently just over $223 billion.

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