In this captured illustration photo, Facebook and Libra logos are displayed on a smartphone … [+]
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The financial leaders of the world’s seven largest economies don’t believe Facebook’s Libra stablecoin is ready to go. According to Reuters, the G7 bankers will release a statement against the launch on Tuesday until the scales are properly regulated.
Facebook announced its ambitious plans to launch a digital global currency last year to further its potential advantages over traditional cryptocurrencies and to make sending money around the globe as easy as texting and cheaper than most international transfers. With billions of users around the world, the scales could even exceed governments and central banks and help the 1.7 billion non-banks enter the global financial system.
According to a draft published by the G7 that was being prepared for a meeting of finance ministers and central bankers from the US, Canada, Japan, France, UK, Italy and Germany, Libra has the potential to improve access to financial services and reduce costs not lost to the bankers. However, they warn that without proper oversight and regulation, the Libra could undermine financial stability, consumer protection, privacy, taxes or cybersecurity. Not to mention money laundering, terrorism and proliferation financing, and market integrity. In light of this, a fair concern is for the company to “act fast and break things”.
“The G7 continues to claim that no global stablecoin project should be operational until it adequately addresses the relevant legal, regulatory and regulatory requirements through appropriate design and compliance with applicable standards,” the draft said
According to Facebook’s first announcements about Libra, the model differs from Bitcoin in that it is a blockchain with permissions rather than an unauthorized blockchain. With the latter, anyone with the right hardware can apply the mining protocols and validate transactions. Libra will centralize the blockchain, with consensus mechanism, software and governance controlled by members of the Libra Association who can validate transactions. And as a stable coin, it is tied to a traditional currency or shopping cart and used for payments or to store value.
“At launch, the Libra blockchain will have 100 approved organizations. Visa, Mastercard, Uber, Vodafone and Spotify are among the founding companies of the Libra Association, ”said the Forbes Technology Council.
In response to Facebook’s announcement of the Libra, the G20’s Financial Stability Board (FSB) issued ten recommendations in April for a joint international approach to regulating stable coins. As the G7 draft notes, many G7 agencies are examining the risks and opportunities associated with central bank digital currencies. In fact, this month the European Central Bank said it could potentially issue a digital euro, and the Bank of England has also started considering a digital pound sterling.
It is currently unclear whether the G7 opposition will have a significant influence on Libra’s launch plans or whether various countries can or would impose sanctions on the company if it decides to take another step.