Just a few days ago, Visa and Mastercard withdrew from the Libra project due to regulatory uncertainty. Now, Facebook’s proposed cryptocurrency has suffered a further setback. The BBC reports having seen a report from the G7 economic organisation highlighting the major risks of digital currencies like Libra.
The report does not deal with traditional cryptocurrencies like Bitcoin that are traded as commodities. It instead focuses on proposed so-called stable globalcoins that are tied to national currencies. While Libra is not specifically mentioned in the report, it clearly fits the criteria.
The contributors to the report include high-level officials from the IMF, central banks, and the Financial Stability Board. The report stresses that any company operating such a digital currency must be morally and legally sound in areas like preventing coins from being used to fund terrorism or launder money and protecting people’s privacy.
It also raises the prospect that such global stablecoins could pose problems for central banks when setting interest rates. It even speculates that one could jeopardise financial stability if it suffered a sudden loss of confidence.
While Libra does appear to have a small mountain to climb, the G7 report does acknowledge that such a currency could provide a cheaper and faster way to make payments than the current “slow, expensive and opaque” system. It adds that 1.7 billion people could also benefit from gaining access to financial services through it.