Tuesday, July 5, 2022

G7 warns Facebook against launching Libra before proving safe


Zain Zubair
Zain Zubair is a staff writer for World News Observer. He is studying ACCA in Pakistan. Besides Accountancy and writing pieces, he loves cooking and nature photography. Zain has attended various modern journalism workshops. Contact: [email protected]

A report issued by the Group of Seven (G7) industrialized nations warned that Facebook’s Libra should not be launched until the company proves safe and secure. The world’s largest economies have warned that cryptocurrencies such as Libra are a threat to the global financial system.

According to the BBC website, the draft report presents 9 major risks posed by the cryptocurrencies, warned that even if supporters of Libra currency address these concerns, the project may not get approval from the organizers in the end. This warning came after the withdrawal of PayPal, MasterCard, Visa, eBay and Stripe from the Libra project, citing organizational uncertainty.

The G7 working group that prepared the report included senior officials from central banks, the International Monetary Fund and the Financial Stability Council, which coordinates the laws of the G20 economies. The task force said that the Cryptocurrency supporters such as Libra should be legal, and that Protect consumers and ensure that currencies are not used for money laundering or terrorist financing.

G7 report, which is due to be presented to finance ministers at the IMF’s annual meetings this week, did not mention Libra individually, but at the same time shows that cryptocurrencies designed to reduce price volatility with the possibility of rapid expansion pose a host of potential problems.

While cryptocurrencies designed to reduce price volatility such as Libra are different from other cryptocurrencies including Bitcoin, because they are tied to a basket of fixed currencies such as the dollar and the euro. Report also warned that Libra could stifle competition among other providers, threatening financial stability if users suffer from loss of confidence in cryptocurrency.

Draft report said that the G7 believes that any cryptocurrency project designed to reduce price volatility should not be operational until the legal, regulatory and regulatory challenges and risks are adequately addressed.

The report highlights concerns about the feasibility of the project even if Libra’s supporters are dealing with concerns raised by governments and central banks, and the report says that addressing such risks is not necessarily a guarantee of regulatory approval.

Read also: EU interrogates Facebook about Libra

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