Facebook and Libra

Facebook has been looking into creating a new digital currency
called Libra^[1], to be released in
2020.

However, the social media giant’s plans will have to remain on
hold as financial regulators take a closer look. These regulators
state that digital currencies in general, may pose a threat to the
global financial system. 

Major backers of the project, which include Mastercard and Visa,
have pulled out of the project, stating regulatory uncertainty^[2].

RELATED: FACEBOOK TOLD BY DEMOCRATS
TO HALT PRODUCTION OF LIBRA CRYPTOCURRENCY^[3]

Facebook and Libra

Facebook’s Libra project was launched earlier this year and was
due to be up and running by 2020^[4]. As a digital currency,
the project was focusing on people who lack access to a bank.

Facebook’s digital currency dealt another
blow https://t.co/WRFbxdkNMO #in #tech^[5][6][7]

So far, reactions to the currency haven’t been all positive.
Concerns over how Libra would handle money laundering, financial
stability, and consumer protection have been voiced. Terrorism financing^[9] has also been
mentioned. 

Another danger is that the already-registered 2.39 billion^[10] Facebook users could
create an unstable global financial system — now a major
concern.

G7 taskforce and financial regulators are on the case

A draft report put together by the G7 has laid
out nine principle
risks^[11] these types of
cryptocurrencies pose. 

The G7 taskforce comprises senior
officials from central banks, the International Monetary Fund
(IMF), and the Financial Stability Board, which monitors global
financial rules.

The report^[12] underlined the
importance that digital currencies must be legally sound and
protect consumers. They mustn’t allow their coins to be used for
money laundering or to fund terrorism. 

The report will be presented at the IMF annual
meetings^[13] in Washington, D.C.
this week. 

The finger is pointed at ‘global
stablecoins^[14]‘ that have the
potential to grow rapidly, and it’s not just Libra in the spotlight
but many others.

The difference between stablecoins and cryptocurrencies like
Bitcoin^[15] is that stablecoins are
linked to established currencies like the U.S. dollar or the pound
sterling. 

Libra could “stifle competition.”

Because Libra has the potential to be huge, given its link to
nearly 3 billion Facebook users, the G7 report has
noted that this type of stablecoin could lead to instability
issues.

Furthermore, there is the worry that Libra could “stifle
competition” going as far as threatening financial stability if
users suddenly lost faith in the digital currency. 

The draft report stated that:
“The G7 believe that no stablecoin project should begin
operation until the legal, regulatory and oversight challenges and
risks are adequately addressed.”^[16]

Today, the Libra
Association^[17], which includes
Facebook, is holding its first board meeting in Geneva,
Switzerland. 

NEW: “Visa has decided not to join the Libra
Association at this time,” the company tells CNBC.

Visa is the fourth company to drop out today and the fifth
total. https://t.co/s9HM6vURDu^[18]

So far, Mastercard, Visa, Stripe, eBay, and PayPal have
all withdrawn^[20] from the Libra scheme.
It’s not looking good for Libra right now.