A report published Thursday by a G7 working group warned against the creation of privately created digital currencies until regulators got to grips with them.
The group of representatives from major western economies and Japan, led by the European Central Bank board member Benoit Coeuré, said that there are several “legal, regulatory and oversight challenges and risks related” associated with so-called “stablecoins”—digital currencies pegged to fiat values. Amongst the key threats listed were market integrity, data privacy, and terrorist financing.
For those stablecoins that seek access to global markets, the G7 expressed concerns over monetary policy, financial stability, the international monetary system, and fair competition.
“In some designs, agents such as designated market-makers may have significant market power and ability to determine stablecoin prices, with the potential for market abuse,” reads the report.
The report also mentions that additional risks arise for stablecoins that are linked to a basket of assets, the composition of which the issuers can change at any time. Indeed, it was this very issue that Anchorage CEO Diogo Monica, a member of the Libra Association, Facebook’s stablecoin initiative that draws in huge companies from all over the world, dismissed as not worthy of commenting on in a recent interview with Decrypt.
The report comes as another blow to the Libra Association, several members of which have recently dropped out. Despite Libra’s claim that it would launch with 100 members, as originally planned, some of its biggest partner organisations including PayPal, Visa, eBay and Mastercard have abandoned the project.
“The G7 believes that no global stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks outlined above are adequately addressed,” reads the report.