When launched on a wide scale, stablecoins – digital currencies usually backed by traditional money and other assets – could threaten the world’s monetary system and financial stability, a G7 working group said in a report to finance ministers gathered in Washington for the IMF and World Bank fall meetings.
The emerging technology, which like other cryptocurrencies is at present mostly unregulated, could also hinder cross-border efforts to deal with money laundering and terror financing, and throw up problems for cyber security, taxation and privacy, the report said.
“The G7 believes that no global stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks” are addressed, said the task force, which is chaired by European Central Bank board member Benoit Coeure.
“Private sector entities that design stablecoin arrangements are expected to address a wide array of legal, regulatory and oversight challenges and risks,” the report added.
The report underscores concern among global policymakers about stablecoins such as Libra, and presents a further headache for Facebook’s project after a chastening week.
Amid sharp regulatory scrutiny, the 21 firms backing Libra pledged on Monday to forge ahead with the project, shrugging off the defection of a quarter of its original members, including payments giants Visa and Mastercard, this month.