Facebook’s Libra cryptocurrency is enduring a torrid time at the moment – and it only seems be getting worse. In the latest developments, five more major companies have pulled out of the project, a G7 report has said the cryptocurrency cannot go ahead without proof it is safe, and a Financial Stability Board (FSB) report has warned against the “potential financial stability issues from global stablecoins”.
Mastercard, Visa, eBay, Stripe, and Mercado Pago have all followed in PayPal’s footsteps by leaving the Libra Association behind. The decisions made by Mastercard, Visa, and Stripe may have also been influenced by a letter they received from US senators urging them to reconsider their position.
Visa told the Financial Times, which first reported their departure, that it would continue to show an interest in Libra and will make an ultimate decision on the project once it knows that the Association can “satisfy all requisite regulatory expectations”. Stripe agreed that the project has “potential” and was still open to working with it in the future. eBay, similar to PayPal, has left to focus on its own projects.
A report from the G7, seen by the BBC, has outlined nine major risks that are posed by digital currencies like Libra, stating cryptocurrencies must not be allowed to progress until it has been proven they are safe and secure.
The report, which doesn’t specifically name Libra, says that all backers of digital currencies must be legally sound, protect consumers, and make sure that their coins are not used for criminal activity.
The G7 taskforce behind the report is made up of senior officials from central banks, the International Monetary Fund (IMF), and the FSB.
A separate letter to G20 finance ministers and central bank governors from the FSB’s chairman, Richard Quarles, says that stablecoins have the potential to “pose a host of challenges to the regulatory community” including risks to “financial stability, consumer and investor protection, data privacy and protection, financial integrity including AML/CFT and know-you-customer compliance, mitigation of tax evasion, fair competition and anti-trust policy, market integrity, sound and efficient governance, cyber security and operation risks, and an appropriate legal basis”.
At the same time, it acknowledges that stablecoins can also benefit the financial system by offering a vehicle for cross-border payments and remittances to more users.
The FSB’s final report on the matter will be released in July 2020.
In other news, Facebook is also being sued by the mobile banking app Current over the similarity between the Calibra logo and Current's one. Both logos were designed by the same branding firm, called Character, which is also named as a defendant in the lawsuit.