Facebook’s Libra has ticked off as a threat to global financial stability by the G7 group of nations, as per report from Reuters on Thursday.
The task force set up by the G7 nation so as to examine the regulatory issues related to Facebook’s Libra. The committee states that the rules of the “highest” standards will be required to minimize the use of digital currencies in money laundering and funding terrorism.
As per a draft summary of the meeting obtained by Reuters, the meeting of finance chiefs from the G7 in Chantilly, France, this week, followed with a statement that they would address tax issues raised by the digital economy. The agenda at the meeting was majorly concentrated around Facebook’s Libra and the subsequently perceived risk to the monetary control of regulators.
Benoit Coeure, European Central Bank (ECB) board member and head of the G7 task force, told the G7:
“A global stablecoin for retail purposes could provide for faster and cheaper remittances, spur competition for payments and thus lower costs, and support greater financial inclusion.”
He went on to state that such cryptocurrencies raise “serious risks” to policy priorities, for instance, anti-money laundering, financing of terrorism, consumer and data protection, competition and compliance with tax rules.
Francois Villeroy de Galhau, Bank of France governor and member of the governing council of the ECB added that while regulators seek to encourage innovation, “that cannot come to the detriment of the security of the consumer.” He further elaborates that more details are required to measure gray aspects of Facebook Libra.
Per a piece in the Financial Times further quotes Coeure stating that cryptocurrencies like Libra “could also pose issues related to monetary policy transmission, financial stability and the smooth functioning of and public trust in the global payment system.”
Bruno Le Maire, the French finance minister echoes previously stated concerns in regards to the dominance of national currencies by a token launched by a tech firm with billions of users: “The sovereignty of nations might be weakened or jeopardized by these new currencies.”
G7’s draft document states that “significant work” is required from developers of stablecoins like Libra before regulatory approval is likely to be granted. The FT cites the document as saying:
“As large technology or financial firms could leverage vast existing customer bases to rapidly achieve a global footprint, it is imperative that authorities be vigilant in assessing risks and implications for the global financial system.”
Amongst its recommendations, the G7 adds that highest regulatory standards such be employed for such stablecoin, falling under regulatory oversight. A good legal basis in jurisdictions that guarantee adequate protection for stakeholders and users. The group further lists the need for “operational and cyber resilience” and secure, transparent management of assets to protect market integrity.
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