It seems Facebook‘s Libra association is falling deeper and deeper each day. As per G7, the group of the biggest economies in the world report, it has, as quickly as possible, to prove that it is safe and secure and poses no risk for its users.
In a massive slap to the social media company, the report says that cryptocurrencies (including not only Libra) are a big risk to a world’s financial system.
The report says that even if Libra’s creators are able to address global concerns – the project may not get regulators’ consent. The warning came after big financial companies backed up from the whole deal.
It’s important to stress out that the report itself doesn’t single out Libra but is turned to all “global stablecoins” that have the possibility to “scale rapidly” posing a mixture of troubles.
Stablecoins as is Libra differentiate from other cryptocurrencies, as is e.g. Bitcoin, because they are pegged to established currencies such as dollar and euro. Concretely Libra is pegged to a packaged of currencies: 50% United States dollar, 18% Euro, 14% Japanese yen, 11% Pound sterling and 7% Singapore dollar.
It is said the global cryptos may lead to a number of serious problems that may have an impact on the landscape of the world’s economy.
One of the problems report is writing about is also the thing that Libra could suppress competition among other possible suppliers and create a threat for the financial stability. It is so as nobody can guarantee you that people will always stay confident in digital currencies.
The report says:
“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.”
On Sunday there was another report published that warns that the introduction of “global stablecoins” poses a host of regulatory challenges.
Randal Quarles, FSB chairman, in his letter to G20 finance ministers, writes that these challenges “should be assessed and addressed as a matter of priority”.
However, Libra maybe not the only one facing rigorous inspections.
One of the biggest banks in the world, JP Morgan issued its JPM Coin, which is backed by US dollars and it seems the US government isn’t satisfied with this as well.
The G7 report admits cryptocurrencies eventually could provide a faster and cheaper system in order to make payments and confirms the current system is often “slow, expensive and opaque”.
The ugly truth is that the world still has over 1.7 billion people who can’t get access to financial and banking services and such projects as Libra really have a power to change the situation.
Facebook and the Libra Association still haven’t commented as well as G7 spokesman.