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Facebook’s digital currency dealt another blow

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Payments giants abandon Facebook's Libra cryptocurrency

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Facebook said it expected to launch Libra in 2020

Facebook's Libra cryptocurrency should not advance until it proves to be safe and secure, according to a report from the world's largest economies.

In a blow to the social media giant, the G7 group of nations report warns that cryptocurrencies like Libra pose a risk to the global financial system.

The preliminary report outlines nine major risks posed by these digital currencies.

He warns that even if Libra supporters address concerns, the bill may not get regulatory approval.

The warning comes just days after the payment giants Mastercard and Visa left the Libra project, citing regulatory uncertainty.

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

He claims that financiers of digital currencies like Libra must be legally sound, protect consumers and ensure that currencies are not used to launder money or finance terrorism.

While the report, which will be presented to finance ministers at IMF annual meetings this week, does not highlight Libra, it says that "global stablecoins" with the potential to "scale fast" present a number of potential problems.

  • Payment giants abandon Facebook Pound
  • France promises to block Facebook's Pound in Europe

Stablecoins like the Pound are different from other cryptocurrencies like Bitcoin in that they are tied to established currencies like the dollar and the euro.

Stifle the competition

While this is designed to limit large fluctuations in value, the report says global cryptocurrencies like Libra can cause problems, even for policy makers who set interest rates.

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

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So-called stablecoins like Libra should be less volatile than Bitcoin.

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

It also questioned the viability of the project, even if Libra supporters address concerns raised by governments and central banks.

"Addressing these risks is not necessarily a guarantee of regulatory approval for a stablecoin agreement," the report says.

Facebook is facing intensified international scrutiny of its cryptocurrency project.

A separate FSB report, issued on Sunday, warned that the introduction of "global stablecoins" poses a number of regulatory challenges.

Release delay

In a letter to the G20 finance ministersRandal Quarles, FSB President, warns that these challenges "should be evaluated and treated as a matter of priority ".

The FSB is working with authorities around the world to identify possible regulatory gaps and will publish a report next summer.

Facebook has already warned This regulatory scrutiny may delay or even prevent the release of Libra.

Pound is not the only digital currency facing scrutiny.

JP Morgan's JPM Coin, which is backed by US dollars, is a stablecoin that should also be examined.

& # 39; Pressure Increases & # 39;

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

As well as Mastercard and Visa, Stripe, eBay and Paypal also withdrew from the scheme, which is also backed by Uber and Lyft.

The G7 report acknowledges that cryptocurrencies potentially provide a faster and cheaper way to move money and make payments, and says the current system is often "slow, expensive and opaque."

Currently, there are 1.7 billion underserved and underserved consumers who could benefit from broader access to financial services, he adds.

Facebook and the Libra Association declined to comment. A G7 spokesman could not be reached for comment.

However, the Facebook executive in charge of the Libra project said earlier this month that losing support from big business was "liberating." David Marcus added, "You know you're ready for something when so much pressure builds up."

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