- The report outlines 9 major risks posed
- Addressing the risks doesn’t guarantee approval
- Report says Stablecoins are riskier than other cryptocurrencies
G7 has said in a report that stablecoin projects, including Facebook’s Libra should not be allowed to proceed until they are proven to be safe and secure. The draft report has outlined at least nine risks such as digital currencies pose.
Threaten the Traditional Financial System
In what appears to be another setback to the yet-to-be-launched cryptocurrency, the Group of Seven (G7) draft report is contained on Sunday, October 14, 2019, BBC report that says the to-be widely adopted cryptocurrency such as Facebook’s Libra could threaten the traditional financial system. The report stated:
“The G7 believe that no Stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks are adequately addressed.”
A G7 Taskforce that’s made of senior officials from Central banks, the International Monetary Fund (IMF) and the Financial Stability Board, which coordinates rules for the G20 economies produced the report. The G7 comprises the world’s biggest economies like France, the U.S., Japan, Canada, Italy, Germany and the U.K. According to the report, even if Libra’s backers addressed the concerns that have been raised, the Stablecoin would still face an uphill task to receive approval from the regulators. The report added:
“Addressing such risks is not necessarily a guarantee of regulatory approval for a Stablecoin arrangement.”
Stablecoins Like Libra Are Riskier
As per the BBC report, which will be presented to finance ministers during the IMF annual meeting later this week, the G7 identified at least nine serious risks posed by such digital currencies which include legality concerns, potential harm to consumers (security), and potential criminal activity (money laundering and terrorist financing) taking place on the network.
The Taskforce further said that unlike other cryptocurrencies, such as Bitcoin (BTC), Stablecoins like Libra are riskier since they are pegged to established currencies such as the dollar and euro. The report also avers that Libra could threaten traditional financial services firms, potentially allowing for near-instant free and private transactions that would easily beat any consumer solution in place today.
In the meantime, The Financial Stability Board (FSB), which coordinates rules for the G20 nations, produced a separate report focusing on the regulatory challenges posed by the introduction of “global Stablecoins.” FSB Chairman Randal Quarles’ message to G20 Finance ministers warns that these challenges “should be assessed and addressed as a matter of priority.” The latest blow to Libra comes at a time when payments companies MasterCard and Visa have left the Libra project due to regulatory uncertainty hot on the heels of PayPal that quit the Libra alliance a week before.