In a draft report from Oct. 13 that outlines nine major risks related to digital currencies, the Group of Seven (G7) nations (the US, the UK, Canada, France, Germany, Italy, and Japan) stated that stablecoins like Libra pose a threat to the global economy. The draft also notes that addressing legal concerns related to regulation and oversight is “not necessarily a guarantee of regulatory approval” for stablecoins such as Libra, which could make things even worse for Facebook’s stablecoin.
The report also states that while not synonymous with regulatory approval, addressing these legal concerns is of the utmost importance: “The G7 believe that no stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks are adequately addressed." The report, to be shown this week at the annual meetings of the International Monetary Fund, doesn’t address Libra directly, but it applies to all global stablecoins projects that can scale rapidly.
According to the G7, a stablecoin like Libra could also heavily affect competition among other stablecoins, and sudden changes of opinion or a possible loss of confidence in the coin could threaten financial stability.
This is only one of the latest instances in the run of bad news for Libra. Things started with PayPal quitting the association early in the month. Then on Friday, five Libra Association members, including Mastercard, Visa, and Ebay, dropped out from the project; and today Booking Holdings became the 7th Libra Association to leave the project, one quarter out of the original 28 members.
US Secretary of the Treasury Steven Mnuchin weighed in on the situation in an interview with CNBC, stating: “I think they realized that they’re not ready, they’re not up to par. And I assume some of the partners got concerned and dropped out until they meet those standards.”