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Home / Business / Facebook's digital currency took a new hit

Facebook's digital currency took a new hit



  Facebook had stated that they hoped to launch Libra in 2020 Copyright copyright
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Facebook had said it hoped to launch Libra in 2020

Facebook's Libra cryptocurrency must not go ahead until the company has proven it is safe and secure, according to a report from the world's largest economies.

In a battle for the social media giant, the G7 Group of Nations report warns cryptocurrencies that Libra poses a risk to the global economic system.

The draft report outlines nine main risks posed by such digital currencies.

It warns that even though Libra's supporters raise concerns, the project may not receive approval from regulators.

The warning comes just days after the payment giants Mastercard and Visa were withdrawn from the Vågen project, citing regulatory uncertainty.

The G7 workforce that produced the report includes senior central bank officials, the International Monetary Fund (IMF) and the Financial Stability Board, which coordinate rules for the G20 economies.

It states that supporters of digital currencies such as Libra must be legally sound, protect consumers and secure coins are not used to launder money or fund terrorism.

While the report, which will be presented to finance ministers at the IMF's annual meetings this week, does not identify Libra, it says "global stablecoins" with the potential to "scale quickly" pose a number of potential problems.

  • Payment giants leave Facebook's Libra
  • France promises to block Facebook's Libra in Europe

Stablecoins like Libra are different from other cryptocurrencies, like Bitcoin, because they are linked to established currencies such as dollars and euros.

Stifling competition

Although designed to limit large swings in value, the report says global cryptocurrencies such as Libra can pose problems, including for policy makers who set interest rates.

The report also warns that Libra can stifle competition among other suppliers and even threaten financial stability if users suddenly experience a "loss of confidence" in the digital currency.

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So-called stack coins such as Libra should probably be less unstable than Bitcoin

The draft report states: "G7 believes that no stablecoin project should start operations until the legal, regulatory and supervisory challenges and risks are adequately addressed."

There is also doubt about the viability of the project, although the emphasis is on supporters satisfying concerns raised by governments and central banks.

"Addressing such risks is not necessarily a guarantee of government approval for a stablecoin scheme," the report states.

Facebook is facing an intensification of international scrutiny of the cryptocurrency project.

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9659007] A separate FSB report, published on Sunday, warned that the introduction of "global stacking coins" poses a number of regulatory challenges.

Launch Delay

In a letter to the G20 finance ministers, Randal Quarles, FSB leader, warns. that these challenges "should be considered and addressed as a priority issue".

FSB is working with officials around the world to identify potential regulatory interventions, and I will be publishing a report next summer.

Facebook has already warned that regulatory control may delay or even prevent the launch of Vågen.

Libra is not the only digital currency facing scrutiny.

JP Morgan's US-backed JPM Coin is a stack coin that is also likely to be investigated.

& # 39; Pressure builds & # 39;

The Libra Association, including Facebook, will hold its first board meeting in Geneva on Monday.

In addition to Mastercard and Visa, Stripe, eBay and Paypal have also withdrawn from the scheme, which is also supported by riding companies Uber and Lyft.

The G7 report recognizes that cryptocurrency can potentially provide a faster and cheaper way to move money and make payments and says today's system is often "slow, expensive and opaque".

There are currently 1.7 billion unbanked and undervalued consumers who can benefit from broader access to financial services, it adds.

A spokesman for the Libra United declined to comment. A G7 spokesman could not be reached for comment.

However, Facebook's manager who was in charge of the Vågen project earlier this month said that losing support for large companies was "liberating". David Marcus added: "You know you're on something when so much pressure builds up."


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