G7 says ‘No’ to stablecoins including Libra until proven to be safe & secure

In a draft report from G7 nations, the group says that the stablecoins must not go ahead until the company proves it is safe and secure. The warning applies to all stablecoin projects including Facebook’s Libra. Source: BBC news.

The report from G7 adds that even if stablecoins backers satisfy concerns raised by governments and central banks, it does not guarantee regulatory approval for a stablecoin arrangement. JP Morgan’s JPM Coin, which is backed by US dollars, is also likely to be examined.

Stablecoins are different from other cryptocurrencies like Bitcoin as they are pegged to fiat currencies such as the dollar. While stablecoins limit big swings in their value, the G7 report warns that stablecoins such as Libra could stifle competition among other providers and even threaten financial stability if users suddenly suffer a “loss of confidence” in the digital currency.

The Financial Stability Board (FSB), who coordinates rules for the G20 nations, also shares the same view. In a letter to G20 ministers and governors sent on Sunday by Randal K. Quarles, he mentioned that given the potential of stabecoins to become systemically important, it could pose a host of challenges to the regulatory community.

This is a new blow for the Facebook Libra project which saw recently 6 founding members leaving the project citing regulatory uncertainty. Today, Facebook‘s Libra has arranged the first council meeting where the charter will be formally signed with the remaining founding members. This warning from G7 could definitely put a dent in Facebook’s Libra stablecoin development and raise more doubts among the members.