Cryptocurrencies such as Libra risk upsetting the world’s financial system if they are not regulated tightly, G7 finance ministers have warned.
According to Reuters, French finance minister Bruno Le Maire told a news conference on July 18 that the G7 “cannot accept private companies issuing their own currencies without democratic control.”
His remarks followed informal talks in Paris, where the Group of Seven expressed vehement opposition to the prospect of firms having as much power as countries in creating means of payment.
The ministers and central bank governors also warned:
“Stablecoins and other various new products currently being developed, including projects with global and potentially systemic footprint such as Libra, raise serious regulatory and systemic concerns.”
Benoit Coeure, a European Central Bank board member, had told the meeting that global stablecoins could boost competition in the payments sector, reduce fees for consumers and support greater financial inclusion. However, he warned that they could undermine efforts to clamp down on money laundering, terrorism financing and tax compliance.
The draft document from the G7, seen by The FT, stated that “significant work” is required from developers of stablecoins like Libra before regulatory approval is likely to be granted. The FT cites the document as saying:
“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 warnings come after Facebook faced tough questions about Libra at hearings in Congress on Tuesday and Wednesday of this week. David Marcus, the CEO of the tech giant’s Calibra crypto wallet, stressed that the project would not launch until all regulatory concerns had been addressed.
This didn’t stop politicians at the hearing from criticizing Facebook for its past failings in protecting user data, and questioning why the company thought it was fit to launch a stablecoin on such a global scale.
Other lawmakers expressed concerns that Facebook could undermine the U.S. dollar and the American economy by basing Libra in Switzerland.