Facebook's plans to launch its own virtual currency, Libra, are finally looking more complicated than expected (see EUROPE 12277/24). On Thursday 18 July, G7 finance ministers and central bank governors expressed their willingness to take action to oversee this type of monetary project.
While the final declaration still had to be fine-tuned, one French source had already expressed a “broad consensus on the need to act quickly” (see EUROPE 12298/8) on Wednesday evening.
The summary of the discussions, published by the French G7 Presidency at the end of the 2 days of meetings, confirms that the ministers agreed that “stable coins and other new products under development [...] such as Libra raise serious regulatory and systemic concerns, as well as public policy issues that must all be addressed before these projects can be implemented”.
While the theme of the discussion was broader and focused on ‘stable coins’, it was on the Facebook project that ministers’ concerns crystallised.
At a press conference, US Treasury Secretary Steven Mnuchin explained that Facebook's white paper on Libra had many shortcomings. Nevertheless, some concerns are also applicable to cryptoassets, whether they are stable currencies or not, he said. French Minister Bruno Le Maire, for his part, stressed the technical and political difficulties posed by the Libra project.
Concrete proposals expected in the autumn.
While consensus is needed to “act”, for concrete proposals, on the other hand, it will be necessary to wait a little longer. At this stage, the ministers merely welcomed the preliminary conclusions of the working group on stable currencies, coordinated by Benoît Coeuré, member of the ECB's Executive Board.
The group will deliver its final report, which will include concrete proposals to guide Libra, but also more general recommendations on payment systems, by the time of the IMF and World Bank annual meetings in October 2019, said Bruno Le Maire.
Nevertheless, the group's interim report already lays down some basic obligations to which any new draft currency should be subject: in particular, it should comply with the highest regulatory standards – such as those of the Financial Action Task Force on Money Laundering (FATF) – and be subject to supervision. The principle of “same activities, same risks, same rules” should also apply, says a document summarising the main points of the report, which is confidential.
Such initiatives should also be based on “a solid legal basis in all the jurisdictions concerned”. At a minimum, issuers of stable currencies should clearly explain the nature of the commitment they make to the holders of their currencies and the risks associated with holding these assets.
“Significant work by stable coin developers and further engagement with the public and authorities will be required before they can expect approval by relevant authorities, as these considerations can only be adequately addressed by ensuring transparency and making more detailed information available for proper assessment”, the working group warns. (Original version in French by Marion Fontana)