G7: Cryptocurrencies Such as Libra Pose a Risk to the Global Financial System

The Group of 7 (G7), representing the 7 largest developed economies in the world, is preparing a report slamming Facebook’s Libra. The proposed stablecoin that aspires to be a non-sovereign global currency has been hammered since it was revealed earlier this year.

Government officials from around the world have voiced their concern regarding Facebook’s crypto push, meanwhile, the Libra Association’s founding partners are abandoning the ship as it becomes more apparent that Libra will never see the light of day in its current form.

According to a report by BBC:

“… the world’s biggest economies warned cryptocurrencies such as Libra pose a risk to the global financial system … The draft report outlines nine major risks posed by such digital currencies.”

The BBC adds that the report does not mention Libra by name but the target is clear.

Additionally:

“The G7 believes that no stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks are adequately addressed.”

Last week it was revealed that multiple partners have abandoned Libra.

Next week, Mark Zuckerberg, Facebook CEO, is scheduled to testify in front of the House Financial Services Committee in a hearing that could add to Libra’s growing problems.

The chatter about Libra has migrated from one of curiousity to one of when will Facebook pull the plug.

On another note, Randal K. Quarles, Chair of the Financial Stability Board (FSB), has posted a letter regarding their concerns:

“The G7 working group on stablecoins is delivering a preliminary assessment of opportunities and challenges posed by “global stablecoins”. The G7 working group will be handing off work on regulatory issues to the FSB, and we have already begun work in this area. The FSB has formed a working group, which is tasked with examining the regulatory issues raised by stablecoins that have the potential to reach global scale, taking into account the perspective of emerging markets and developing economies. The group’s work should inform policy approaches that harness the benefits of financial innovation, while addressing associated risks for the financial system, and advise on possible multilateral responses as necessary.

The FSB is submitting an issues note on global stablecoins to the October 2019 G20 Finance Ministers and Central Bank Governors meeting. The FSB will submit a consultative report to the G20 Finance Ministers and Central Bank Governors in April 2020, and a final report in July 2020.”


Randal Quarles FSB Stablecoins P131019

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