G7 nations wary of Facebook's 'Libra' cryptocurrency plan
July 17, 2019
After US lawmakers grilled Facebook on its ambitious plan to create a financial ecosystem based on a digital currency, the G7 group of world's most developed economies also expressed their concerns about "Libra" on Wednesday.
The G7 bloc consists of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.
"On Libra, we had a very constructive and detailed discussion with a very large and shared consensus on the need for action," a French official told the AFP news agency on condition of anonymity, after a meeting of G7 finance ministers in Paris.
"Concerns (were) expressed by all the participants about the current situation and the need to act quickly," the official added.
G7 finance ministers reportedly insisted that tough regulatory problems needed to be worked out before Libra's introduction.
A G7 task force looking at cryptocurrencies like Libra would likely to include a broader range of regulators beyond the bloc, according to the Bank of Japan governor.
A cryptocurrency, like Bitcoin, is designed to decentralize control and serves as an alternative to traditional banking systems. It is a digital asset that works as a medium of exchange using strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets.
Read more: Facebook's cryptocurrency plan is taking shape
Trust deficit?
Facebook's cryptocurrency plan has been met with intense skepticism, not only from data protection activists, but also from politicians and financial regulators. Their skepticism is fueled by the fear that widespread adoption of the new digital currency by the social media giant's 2.38 billion users could upend the financial system.
In recent days, US President Donald Trump and Treasury Secretary Steven Mnuchin have also voiced concerns about the project.
Trump tweeted last week that the new digital currency "will have little standing or dependability." Mnuchin said on Monday: "They're going to have to convince us of very high standards before they have access to the US financial system."
On Tuesday, the Senate Banking Committee questioned David Marcus, Facebook's top executive overseeing the project, on issues ranging from how Libra could affect global monetary policy to how customer data will be handled.
"Facebook has demonstrated through scandal after scandal that it doesn't deserve our trust," Democratic Senator Sherrod Brown, the ranking member of the Senate Banking Committee, said in his opening remarks. "We'd be crazy to give them a chance to let them experiment with people's bank accounts."
Read more: Real Sci-Fi: Anarchists, tech utopians and digital cash
German concerns
Facebook's plan has also stirred concerns in places like Germany. "The issuance of a currency does not belong in the hands of a private company because it is a core feature of a sovereign state," German Finance Minister Olaf Scholz said on Tuesday.
Quoting an internal ministry document, Germany's Bild newspaper had earlier reported that the German government and central bank will look into how to prevent Libra from becoming an alternative to national currencies such as the euro. He also warned it could serve as a "gateway for terror financing and money laundering."
US Federal Reserve chairman Jerome Powell, French Finance Minister Bruno Le Maire and Bank of England governor Mark Carney have also spoken out against Libra.
shs/ng (AFP, Reuters)