FinTechPayments TechnologyG7 taskforce to study cryptocurrency regulations

G7 taskforce to study cryptocurrency regulations

France is forming a task force within the G7 nations to examine the regulatory issues after Facebook revealed about its proposed cryptocurrency Libra

France, the current holder of the G7 presidency, is to set up a group taskforce to study how central banks ensure cryptocurrencies, including Facebook’s planned Libra, are governed by regulations covering everything from money laundering laws to consumer protection rules.

The move was announced by France’s central bank Governor Francois Villeroy de Galhau, who hinted that the task force will be led by European Central Bank board member Benoit Coeure. Several ECB officials, including Coeure, have argued in favor of creating such an agency over the past months.

Not in opposition

Officials from France have suggested that they are not in opposition to Facebook’s use of a digital token to handle financial transactions, but are insisting on regulatory compliance. Villeroy reportedly told officials in the finance industry: “We want to combine being open to innovation with firmness on regulation. This is in everyone’s interest.”

As reported by Reuters, Villeroy also called for a network of national anti-money-laundering authorities, coordinated by the European Banking Authority, to carry out emergency measures and even substitute for national authorities, rather than creating a specialized European agency.

An ecosystem of financial services

Facebook threw more light on its Libra cryptocurrency project earlier this month, outlining how it will work with 28 partners, including Mastercard, PayPal and Uber.

Libra will be pegged to a basket of fiat currencies and government-backed securities. Initially, it will be used as means of money transfer across the globe, subsequently developing into an ecosystem of financial services.  Facebook revealed that a new digital wallet will exist in its Messenger and WhatsApp services to make it easy for people to send money to friends, family and businesses through the apps.

European regulator’s worries

The recent unveiling of Facebook’s Libra cryptocurrency has raised quite a few regulatory questions.

Though Facebook’s Libra might not be the main reason behind the task force, France’s finance minister, Bruno Le Maire did express concerns that Libra could gain traction and replace traditional currencies. Calling in G7 central bank governors to prepare a report on stable coins for their July meeting, Le Maire had told Europe 1 radio: “Libra must not become a sovereign currency. It can’t and it must not happen.”

“This money will allow this company to assemble even more data, which only increases our determination to regulate the internet giants,” he had added in the parliament.

A German member of the European Parliament, expressing similar concerns, said: “Facebook is at risk of becoming a shadow bank and must not be allowed to operate in a regulatory nirvana when introducing virtual currencies.”

Libra was also a talking point at the European Central Bank’s annual symposium in Sintra, Portugal, where Bank of England Governor Mark Carney said: “Anything that works in this world will become instantly systemic and will have to be subject to the highest standards off regulation.”

Reactions from the US

US lawmakers Rep. Maxine Waters, who chairs the House Financial Services Committee, called on Facebook to pause, citing the company’s seemingly endless list of scandals.

Waters said in a statement: “With the announcement that it plans to create a cryptocurrency, Facebook is continuing its unchecked expansion and extending its reach into the lives of its users.

“The cryptocurrency market currently lacks a clear regulatory framework to provide strong protections for investors, consumers and the economy. Regulators should see this as a wake-up call to get serious about the privacy and national security concerns, cybersecurity risks, and trading risks that are posed by cryptocurrencies.”

The US Senate Committee on Banking, Housing, and Urban Affairs has a hearing scheduled for Libra on July 16.

Since the Cambridge Analytica scandal, the spotlight has been relentlessly focused on the social media giant’s next moves.

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