G7 Warns on Libra’s Implications on Global Financial Sector

The body wants strict regulation on the digital currency.

A recent report by a G7 taskforce warned that Facebook’s Libra has the potential to destabilize the global economy and thus should be regulated tightly.

“…they give rise to a number of serious risks related to public policy priorities including, in particular, anti-money laundering and countering the financing of terrorism, as well as consumer and data protection, cyber resilience, fair competition, and tax compliance,” the preliminary report of the group stated.

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Chaired by Benoît Cœuré of the European Central Bank, the task force also acknowledged the benefits of digital currency in terms of financial inclusion and bringing down the cost of remittances.

“A global stablecoin for retail purposes could provide for faster and cheaper remittances, spur competition for payments and thus lower costs, and support greater financial inclusion,” Cœuré added.

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However, the risk posed by Libra on the mainstream financial sector cannot be ignored as it can disrupt the monitory system. Furthermore, there are concerns about money laundering and terror financing using the digital currency as well.

“As large technology or financial firms could leverage vast existing customer bases to rapidly achieve a global footprint, it is imperative that authorities be vigilant in assessing risks and implications for the global financial system,” the report added.

A lucrative user-base for crypto

Though for years regulators are concerned about the curbing the growth of cryptocurrencies, Facebook’s dive into the sector made it a priority as the social media giant has the potential to reshape the entire industry with its 2.38 billion users.

The working group also provided four recommendations to the stablecoins – to ensure public trust by meeting the highest regulatory standards, the initiative should be based on the legality of jurisdictions, ensure operational and cyber resilience, and safe and transparent management of assets.

The United Kingdom’s finance minister recently said that though lawmakers around the world are taking interest on Facebook’s crypto initiative, the matter should only be decided by the regulators.

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