Libra: the G7 wants a legal framework


Libra: the G7 wants a legal framework

Friday, 18.10.2019

For months, many regulators and governments have expressed concerns including Facebook's bad reputation for privacy and protection of personal data. (Keystone)

The sine qua non for launching stable cryptocurrencies, like Facebook's Libra project, is the establishment of a legal framework, G7 finance ministers agreed in Washington on Thursday.

"We agree that no stable digital currency project should be launched until the legal, regulatory and supervisory issues and risks have been adequately addressed," according to a statement by the French G7 recommendations of a report.

"Facebook and its 2.4 billion users could have a global impact," reacted on his side the French Minister of Finance Bruno Le Maire, stressing that it was "also a question of democracy, not simply an economic question ". He was referring to the Libra.

The report, drawn up under the leadership of the Executive Board member of the European Central Bank, Benoît Coeure, does not quote at any time the Libra that the social network wants to launch in 2020.

But it had been ordered in July at the previous G7 Finance in France, shortly after the announcement of the Facebook project. The ministers then sounded the alarm on the potential risks of these digital currencies such as tax evasion or the financing of terrorism.

The G7, which recognizes the many shortcomings in the financial services sector, also agrees to encourage central banks to improve efficiency and reduce the cost of payments and financial services.

In general, "cross-border payments remain slow, expensive and opaque, especially for retail payments such as cash transfers," they note.

In addition, 1.7 billion people around the world have little or no access to financial services, which explains the emergence of digital currencies.

"We must ensure that these 1.7 billion people are included in the financial system," said Bruno Mayor.

For months, many regulators and governments have expressed their concerns, particularly because of the US group's bad reputation for confidentiality and protection of personal data.

The size of Facebook, the world's largest social network with 2.7 billion users (including Instagram, WhatsApp, Messenger …), also implies that the new currency could disrupt the global financial system and make it more difficult for central banks, recently observed the president of the American Central Bank Jerome Powell.

Sovereignty at stake

States and central banks also fear losing their sovereignty: they are for the moment the only ones to have the right to coin money.

The concerns raised by the regulators are "legitimate" and "absolutely reasonable", reacted Thursday David Marcus, head of the project Libra at Facebook, in front of journalists.

"We are determined to (y) respond with concrete solutions," he added, assuring that the exchanges with the regulators were "much more constructive than what is said".

The association that is to manage the future virtual currency has said in a statement that the Libra was "designed to work with existing regulatory institutions and apply the protections they offer to the digital world, without disrupting or undermining ".

Last month, Bruno Le Maire did not hesitate to vote for a ban on the "development of the Libra on European soil".

Yves Mersch, member of the executive board of the ECB, also recently estimated that the Libra could harm the monetary policy of the euro area.

In the United States, Lael Brainard, a member of the executive board of the Fed, in a speech in Washington Wednesday, set out a long list of regulatory challenges facing issuers of digital currencies.

The G7 Finance meeting and Brainard's statements come a week before Facebook boss Mark Zuckerberg testifies before a finance commission in the House of Representatives on October 23.

For its part, China, which is not part of the G7 and who decided two years ago to put cryptocurrencies on the index, accelerates the preparations for its own virtual currency.

The Libra association was officially launched on Monday by 21 founding members in Geneva including PayU, telecom groups Vodafone and Iliad, platforms Uber and Spotify, blockchain actors like Anchorage or Coinbase, venture capital funds like Andreessen Horowitz or non-profit organizations like Kiva.

However, the project was recently weakened by the defection of Paypal, Visa, Mastercard or eBay.

The association on Thursday rejected accusations against Facebook's currency: "The Libra is designed to facilitate compliance with global protections in the fight against money laundering, customer data and illegal financing." (AWP)

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