The G20 dealt Facebook’s Libra cryptocurrency ambitions another blow on October 18, agreeing to a ban stablecoins until global regulations are in place.
Citing “serious public policy and regulatory risks,” the international organization of governments and central bankers called for additional reports to be prepared by the summer of 2020. This appeared to blast a big hole in Facebook’s already dubious goal of sticking to its original timetable that had Libra launching by next year.
Facebook announced plans in June to bring a global stablecoin to market, allowing 2.7 billion users of its various platforms immediate use of the alternative currency. Backed by a basket of fiat currencies, Libra would be governed by an association of companies and nonprofits.
However, several key participants, including Mastercard and Visa, dropped out earlier this month under intense political pressure. And earlier that day, the G7 recommended the temporary ban to the wider group of large economies, citing a variety of potential problems ranging from destabilizing the global economy and undermining national currencies to facilitating crime and terrorism. The intergovernmental organizatino called for “compliance with the highest regulatory standards,” before private stablecoins launch. It also cited the need for “a thorough assessment of potential regulatory gaps.”
That said, the G7 report also noted that stablecoins could bring benefits including cheaper and faster money transfers. These would be of particular use to the poor and unbanked in developing nations, it concluded.
The G20—which is comprised of G7 countries plus 13 of the other largest economies—welcomed that report, according to a release.
“While acknowledging the potential benefits of financial innovation, we agree that global stablecoins and other similar arrangements with potential systemic footprints give rise to a set of serious public policy and regulatory risks,” it said. “Such risks, including in particular those related to money laundering, illicit finance, and consumer and investor protection, need to be evaluated and appropriately addressed before these projects can commence operation.”
After the decision, Japanese Finance Minister Taro Aso told a press conference that “no countries were in favor of” allowing Libra to commence before rules are in place, the Japan Times reported.
While barely mentioning Facebook or Libra, the G7 report specifically targeted “global stablecoins”—particularly those that could be launched on an existing global platform. Such as Facebook.
The G20 decision led Facebook’s Libra point man, David Marcus, to suggest on October 20 that the non-profit Libra Association could instead launch a series of stablecoins denominated in national currencies like the dollar, euro, and pound sterling, Reuters reported.
The G20 called for additional reports from the Financial Action Task Force (FATF) and Financial Stability Board (FSB) in 2020. It also asked the International Monetary Fund (IMF) to study “monetary sovereignty issues” that could arise. The G7 report cited concerns that poor and financially unstable countries could see their currencies abandoned altogether for a truly global stablecoin.