G20 Regulator Wants to Establish Some Ground rules Before Facebook Releases Its Libra Stablecoin

On Tuesday, April 14, the G20’s Financial Stability Board (FSB) has released 10 recommendations on regulating stablecoins. The FSB has said that stablecoin operators like Facebook should face same rules like other businesses which present the same risk regardless of the technology used.

The dynamics of the global economy are likely to change in the future as the world will be looking for more advanced way of money distribution especially after the recent global economic crisis set due to the Coronavirus pandemic.

Probably, digital currencies are like to make faster inroads as global companies and governments accelerate their work on stablecoins. But to let stablecoins enter the money market, major global economies are working on plugging some loopholes in their rulebooks to avoid any private digital currencies like Facebook’s Libra from undermining the financial stability.

Stablecoins are basically digital currencies whose value is fixed or tied to fiat assets and currencies.

Speaking of the existing rules, the FSB said that they apply either in whole or in part to stablecoins and address some of the risks they pose. However, the coverage of these rules might vary from country to country which can leave some gaps while supervising any cross-border stablecoins.

As reported by Reuters, the FSB has proposed flexible cross-border cooperation to avoid any discrepancies between different jurisdictions. In a word with the Reuters, the FSB said: “Relevant authorities should, where necessary, clarify regulatory powers and address potential gaps in their domestic frameworks to adequately address risks posed by global stablecoins”.

Besides, the FSB has added that stablecoin operators should be efficient enough to effectively manage risks and be operationally resilient. Besides, they should have additional safeguard for any cyber attacks and money laundering schemes or other illicit activities like terror financing.

Facebook had announced its Libra cryptocurrency last year in June 2019, however, it met with strong regulatory pushbacks for months. In order to avoid any regulatory tussle, early backers of the project like Visa, PayPal, and MasterCard have pulled out.

Facebook’s massive global presence and potential risk has raised concerns for several banks who are worried of losing their financial strong hold over their global customers. Several central banks have already announced their plans to launch a central bank digital currency (CBDC).

However, Facebook hasn’t given up all hopes for now. Facebook has said that it is open for any sort of financial scrutiny if required. Facebook has said that it continues to move ahead with the Libra plans but also remains open to offering digital versions of government-backed currencies.