Facebook’s Libra digital currency (Libra) has encountered another setback: the G7, the world’s largest economy, said in a report that Libra is sufficiently safe and reliable Previously, the digital currency could not be issued for use.
The G7 report warns that cryptocurrencies like Libra pose a risk to the global financial system.
The draft report outlines the nine major risks posed by these digital currencies. It also warned that even if Libra supporters solve the problem, the project may not be approved by the regulator.
Just a few days ago, the payment giants MasterCard and Visa (177.06, 2.18, 1.25%) withdrew from the Libra project on the grounds of regulatory uncertainty.
The G-7 Task Force includes senior officials from central banks, the International Monetary Fund (IMF) and the Financial Stability Board (FSB).
The report points out that supporters of digital currencies like Libra must comply with the law, protect consumers, and ensure that the digital currency is not used for money laundering or terrorist financing.
The report also adds that the “global stable currency” with the potential for “rapid expansion” constitutes a series of potential problems. Digital currency like Libra is called “stabilized currency” and is different from other cryptocurrencies (such as Bitcoin) because it is linked to multiple legal currencies such as the US dollar and the euro.
Although linked to multiple legal tenders to limit the large fluctuations in Libra’s value, the report said that global cryptocurrencies such as Libra could cause serious problems, including affecting policymakers to set interest rates.
The report also warns that Librae may also curb competition, and even if the digital currency “loses user confidence”, it may also threaten financial stability.
The draft report stated: “The G-7 believes that no stable currency projects should be initiated until the legal, regulatory and supervisory challenges and risks are adequately addressed.”
Even if Libra supporters meet the concerns raised by the government and the central bank, this raises doubts about the feasibility of the project.
Facebook’s Libra project is facing increasingly stringent international scrutiny. Another Financial Stability Board report released last Sunday warned that the introduction of “global stability currency” would bring a series of regulatory challenges.
Randal Quarles, chairman of the Financial Stability Board, warned in a letter to the G20 finance minister that these challenges “should be assessed and resolved as a priority”.
The Financial Stability Board is working with officials around the world to identify potential regulatory loopholes and will issue a report next summer.
In response to the growing regulatory review, Facebook has warned that regulatory scrutiny may delay or even hinder Libra’s release.
It is reported that members of the Libra Association, including Facebook, will hold their first board meeting in Geneva on Monday.
So guys what do you think? If Libra is legalized someday would it be a good alternative to traditional currencies? Or would it just be another cog in the big rusty financial wheel? Let us know your thoughts in the comments.
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