The slow march to death for Libra, Facebook’s forthcoming cryptocurrency, continues. Yesterday, a Group of Seven nations task force threw up another hurdle in a report, stating global stablecoins like Libra could potentially wreck the global monetary system and upend financial stability.
Titled “Investigating the Impact of Global Stablecoins,” the report is the result of a G7 working group, chaired by Benoit Coeure, a board member of the European Central Bank. “The G7 believes that no global stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks are adequately addressed, through appropriate designs and by adhering to regulation that is clear and proportionate to the risks,” the report reads.
What makes stablecoins different from other cryptocurrencies is that they’re backed by traditional currencies to offset the volatility associated with digital currencies – hence the stable moniker. That said, stablecoins have thus far been limited and remain highly unregulated. In particular, the G7 working group identified that stablecoins could botch attempts to curb money laundering and terrorist financing, as well as present risks to fair competition, cybersecurity, consumer privacy, and taxation.
The Libra Association – the oversight group in charge of shepherding Facebook’s cryptocurrency – also released a statement in response to the G7 report. In it, the group tackles the G7's concerns point by point, vowing to work with regulators to address concerns. Because you know, it has to play nice if it wants a shot at ever existing. “In recognition of the importance of the stability of the global financial system and national sovereignty over monetary policy, Libra is being designed to work with existing regulatory institutions and apply the protections they provide to the digital world – not disrupt or undermine them,” the statement reads.
While the G7 report isn’t the final nail in Libra’s coffin, it is a telling sign that global regulators aren’t sold on Facebook’s vision either. That’s already had consequences. When Libra launched back in June, it had 27 companies in its corner – including well-known payments institutions like Visa and Mastercard. But straight out of the gate, the cryptocurrency was met with opposition from the U.S. House Committee on Financial Services and the Senate Banking Committee. That in turn led to rumours that Libra partners were getting cold feet by late August, with PayPal officially calling it quits in early October. A few days later, eBay, Stripe, Visa, and Mastercard also jumped ship. Adding salt to the wound, Calibra – the subsidiary running the cryptocurrency – is facing a lawsuit alleging its logo was ripped off from Current, a mobile banking app.
Facebook CEO Mark Zuckerberg is scheduled to testify before the House Financial Services Committee on October 23. He’ll likely need to address the many concerns brought up by the G7, as well as the fact that major backers meant to lend Libra credibility have since distanced themselves from the project. Given how Zuckerberg’s recent attempts at talking like a human have gone, maybe he’ll be the one to inadvertently put Libra out of its misery. [Reuters]
Featured photo: Getty