The proliferation of stablecoins – such as Facebook’s Libra, underpinned by physical assets – may undermine efforts to stamp out money laundering and the financing of terrorism, according to a global financial watchdog.
Speaking to reporters in Paris, Xiangmin Liu, president of the Financial Action Task Force (FATF), said that both the stablecoin and the companies that issue them would be subject to global standards on cryptocurrencies and traditional financial assets, Reuters reported. He added:
If stablecoins were to become widespread, it could potentially lead to new risks regarding money laundering and terrorist financing. It is our job to ensure the new risks in connection with stablecoins will be adequately addressed.
G7 Report on Stablecoins
Liu’s remarks come just a day after the G7 published a report on stablecoins – saying they appear more capable than cryptocurrencies such as bitcoin of providing a store of value and, therefore, serving as a means of global payment.
However, it also addressed issues of regulatory and legal risk, and said stablecoins such as Libra must comply with global regulators and lawmakers to ensure these risks are addressed before launch. Libra is scheduled to launch in the first half of 2020.
The Libra Association responded to these calls on Friday, saying it would “operate with transparency and in partnership with regulators” and said policymakers must give regulators “time and space to develop appropriate regulations”.
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