On Thursday, Facebook’s plans to introduce its Libra cryptocurrency had to face new hurdles. These hurdles started becoming quite clear when the Group of Seven wealthy nations stated that such “stable coins” must not be allowed to introduce until their high international risks are addressed.
In a report to finance ministers assembled in Washington for the World Bank and IMF fall meetings, the G7 working group stated that when stable coins launched on large scale (backed by conventional money and other assets), it may alarm the world’s financial stability and monetary system.
The growing technology, which is currently unregulated, like other cryptocurrency wallet , might obstruct cross-border efforts to fight against terror financing and money laundering. Further, this could pose problems for taxation, security, and privacy.
Benoit Coeure (European Central Bank board member) said that “The G7 believes that regulatory, legal and oversight challenges should be addressed before starting any global stablecoin project. The report brought concerns for the global policymakers about Libra (stablecoins).
In response, the Libra Association supports cryptocurrency effort. It said that Libra has been designed to respect national sovereignty over the monetary policy. It further added that “Libra has been built to work with the present regulatory institutions and protect the digital world from undermining and disruption. On Monday, 21 members backing Libra, pledged to go ahead with the project.
Payments and Stablecoins
Facebook introduced Libra in June. The social media giant unveiled it in the form of stablecoin,which supports currencies from the euro to the dollar. It is being said as a great move to fit cryptocurrencies into corporate establishment and banking.
Stablecoins focuses on overcoming the high volatility that troubles cryptocurrencies and makes them unfit for payments and commerce. The G7 report stated that the authorities should implement stablecoin on anti-money laundering and current payments’ rules as well as banking standards and capital market.
Facebook says that Libra has been designed to handle inefficiencies in the payment systems at a global level that are beset by the extended transfer times, higher fees and lack of authenticity.
The G7 said that the finance ministers, central banks and other authorities must work to handle these loopholes in payments systems. It further added that the central banks must work in cooperation to rectify the weaknesses of their own digital exchange wallet.