Stablecoins like Libra must be held to highest standards: G7

CHANTILLY, France (Reuters) - Stablecoins like Facebook’s Libra can foster financial inclusion but they must be held “to the highest regulatory standards” to ensure that they aren’t used to launder money and that users are protected, a Group of Seven taskforce on the issue concluded.

FILE PHOTO: Representations of virtual currency are displayed in front of the Libra logo in this illustration picture, June 21, 2019. REUTERS/Dado Ruvic/Illustration/File Photo

The taskforce presented its first report to G7 finance minister and central bankers meeting in Chantilly, France.

Facebook’s plans to launch Libra, a digital token backed by four official currencies, have raised concerns ranging from consumer protection to money laundering and even the notion that the traditional monetary system could be disrupted.

The taskforce, chaired by European Central Bank board member Benoit Coeure, found stablecoins can bring down the cost of remittances and forms of payment, helping poorer people who can ill afford financial services.

But they need to be strictly regulated to ensure they are stable, safe and free of criminal activity.

“A global stablecoin for retail purposes could provide for faster and cheaper remittances, spur competition for payments and thus lower costs, and support greater financial inclusion,” Coeure told the G7 meeting.

“However...they give rise to a number of risks related to public policy priorities including anti-money laundering and countering the financing of terrorism, consumer and data protection, cyber resilience, fair competition and tax compliance.”

Coeure added stablecoins needed to be held to the “highest regulatory standards and be subject to prudent supervision and oversight”.

He cited existing global rules for providers of market infrastructure and guidelines from the Financial Action Task Force against money-laundering and terrorism financing, among other requirements.

But Coeure left the door open to working with developers of stablecoins and to broadening the regulatory work to include other global forums.

“Further engagement of stablecoin developers with the public and authorities will be required,” Coeure said.

“The working group stands ready to take forward its work in coordination with G7 finance ministries, relevant standard-setting bodies and the G20.”

Reporting By Francesco Canepa; Editing by Raissa Kasolowsky