This report found that stablecoins like Libra have implications that amplify the risks associated with money laundering, information security, consumer and investor protection, and tax compliance. It also argues that they could present challenges to competition policies, financial stability, monetary policy itself and, in a nutshell, the entire international monetary system.
In its reply, the Libra Association is pleased that, whit this report, the G7 working group recognises the potential of these technologies for making payments faster, safer and cheaper.
But with regard to the risks identified, the Association argues that the new system that is being created can comply with the current rules on consumer protection, financial stability, money laundering and monetary sovereignty.
It also reiterates once again that it is committed to working with regulators to mirror the robust legislation already in place for fiat currencies with this new financial system.
In fact, it states that Libra was designed to respect national sovereignty over monetary policies, to function within the existing regulatory system, and to facilitate compliance with consumer and investor protections, such as AML and KYC.
The document then goes into detail on these aspects, in an obvious attempt to explain how solutions to reduce risks have already been devised.
At one point it even states explicitly:
“Libra is not intended to change the role and influence of central bankers in the global financial system.
Libra Network will have to comply with regulations.
Every Libra coin will be fully backed by fiat held in bank deposits and cash equivalents in the form of very short-term government securities”.
In short, this document explicitly promises that Libra will comply with all regulations, current and future, and that it will be nothing more than a token to allow an easier, faster and cheaper exchange of fiat currencies.
At this point it is difficult to imagine that the detractors of the project have not understood that this is the approach with which it was launched: not to challenge the current global monetary system, but to improve it.
As a result, there are only two main hypotheses that can be imagined at the basis of the reasons that still push many people not to allow the Libra Association to go ahead:
- either not believing that these promises will be fulfilled,
- or fearing that the current system will not be able to verify that they are fulfilled and react accordingly if they are not.
In reality, these hypotheses are basically the same, corresponding to the fear of not being able to constrain and control at will a project that is born beyond the financial system, which has the potential to change it.
In other words, the basis of Libra’s refusal would be the admission of the inability of the current monetary system to withstand the inevitable impact of such an innovation. Rarely does this lead to real improvements.