According to the G7, stablecoins could negatively affect global financial stability if users lose confidence in the coin.
October 14, 2019, | AtoZ Markets – The Group of Seven (G7) nations - France, the U.S., Japan, Canada, Italy, Germany and the U.K. has reportedly drafted a report which says that “global stablecoins” pose a threat to the global financial system.
G7 says global stablecoins’ pose threat to financial stability
According to a report from BBC on Monday, the G7 taskforce outlined the various risks associated with digital currencies. The report also added that G7 won't allow Libra and other similar projects even if they address regulators’ concerns.
"The G7 believe that no stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks are adequately addressed. [...] Addressing such risks is not necessarily a guarantee of regulatory approval for a stablecoin arrangement."
Furthermore, the G7 expressed concern that Libra could potentially stifle competition from other stablecoin providers. They also said that it could threaten financial stability if users lose confidence in the coin.
What is more, global stablecoins must ensure that their backers are legally sound and they must protect consumers.
This report will be submitted to Central Bank Governors at an annual meeting of the International Monetary Fund (IMF) this week.
More woes for Facebook Libra coin?
The report didn't specifically mention about Libra. However, this could mean trouble for Facebook's Libra project too! For instance, global regulators are increasingly opposing Libra. The Bank of England recently established provisions which Libra needs to comply with in order to operate in the UK.
Maxine Waters, the head of the committee, Democratic Representative has been a noted critic of the project. Earlier this year, the committee drafted the “Keep Big Tech out of Finance Act.”
Pressure has also been building up for Facebook since major payment companies such as Visa, Mastercard, Paypal, and Stripe pulled out of the company’s Libra project citing regulatory uncertainty. As Libra Association members jump ship in droves, Facebook CEO Mark Zuckerberg will testify before the United States House of Representatives Financial Services Committee about Libra later this month.
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