A report from the Group of Seven Nations (G7) has revealed some of the world’s biggest economies believe Facebook’s cryptocurrency Libra shouldn’t be launched until its potential risks as “adequately addressed.”
The report, seen by the BBC, reportedly outlines major risks posed by cryptocurrencies like Libra, and notes its backers must be legally sound, protect consumers, and make sure the cryptocurrency isn’t used to fund terrorism or launder money.
According to the BBC it doesn’t single out Libra itself, but instead refers to “global stablecoins” with the potential to “scale rapidly.” Some of the outlined risks include a potential threat to financial stability of users suffer from a sudden “loss of confidence in Libra,” as well as being a threat to policymakers’ measures.
The report, which is set to be presented to finance ministers at the IMF annual meeting, reads:
The G7 believe that no stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks are adequately addressed
The document further adds that even if the Libra Association manages to mitigate the risks listed in it, this still doesn’t guarantee “regulatory approval for a stablecoin arrangement.” JP Morgan’s JPM stablecoin is reportedly also going to be examined.
In a separate document the Financial Stability Board (FSB), which coordinates rules for G20, noted stablecoins like Libra pose various challenges to financial stability and investor protection, among others.
In the document Randal Quarles, the chairman of the FSB, said these challenges should be “assessed and addressed as a matter of priority.” The BBC’s report comes shortly after Mastercard, Visa, and eBay join PayPal in leaving the Libra Association.
David Marcus, Facebook's executive leading the stablecoin project, rated to the news on social media:
I would caution against reading the fate of Libra into this update. Of course, it’s not great news in the short term, but in a way it’s liberating. Stay tuned for more very soon. Change of this magnitude is hard. You know you’re on to something when so much pressure builds up.— David Marcus (@davidmarcus) October 11, 2019
Notably, the G7 report also acknowledges cryptocurrencies can potentially provide a faster and cheaper way to move money, as the current system can be “slow, expensive and opaque.” The first Libra Association board meeting is set to take place in Geneva on Monday.
Featured image via Pixabay.