Last month, Facebook announced plans that it will be launching its own cryptocurrency, known as “Libra”. However, in talks between G7 ministers, leaders have expressed concerns over the “serious risks” the new digital currency could pose.
Regulators are also becoming increasingly skeptical about the project, pointing out that Facebook has a lot of work to do before the currency could be launched. This was part of the discussions carried out by G7 finance ministers in a meeting this week in Paris.
It’s hoped by Facebook that Libra will become a major cryptocurrency in the coming years. But, at the moment, similar cryptocurrencies have been very volatile in the markets.
These have become known as “stablecoins” and a group, which includes members of the G7, central banks, the Bank for International Settlements, the International Monetary Fund, and the Financial Stability Board has been working on reducing the risks of these currencies.
European Central Bank Executive Board member, Benoit Coeuré is chair of the group, and although he acknowledged that Libra, like other cryptocurrencies, could allow for cheaper, more accessible payments, he also warned about the risks.
For example, he said that “anti-money laundering and countering the financing of terrorism, as well as consumer and data protection, cyber resilience, fair competition and tax compliance,” could cause problems going forward.
He said they must meet “the highest regulatory standards and be subject to prudent supervision and oversight. At a minimum, issuers of stablecoins should clearly explain the nature of the commitment they are making to the holders of their coins and any risks involved in owning this asset.”
He added that they should adhere to “governance and risk management framework” and the currency needs to be “safe, prudent, transparent and consistent with the nature of obligations or expectations of coin holders.”
In an interview, the French minister Bruno Le Mairem, who is currently the chair of the G7, said that “we will not accept that Libra is transformed into a sovereign currency that can endanger financial stability.”