G-7 takes on Libra in study warning of 'significant' risks

A new breed of international digital currencies including Facebook's Libra could have a significant negative impact on the financial system, regulatory officials from around the world said in a joint report to the G-7 Thursday.

The report by the G-7 task force outlines for the first time a joint global response to the social media giant's plans. It describes sweeping concerns with "global stablecoin" projects like Libra, which is facing political and regulatory resistance at the highest levels of government.

Members of the task force include officials from the U.S. Treasury Department, Federal Reserve, Bank of England, European Central Bank and the Bank of Japan.

The report lays out the next steps regulators from around the world should take to police Libra and similar products, making the document a road map for how countries will tackle Facebook's ambitious plans for disrupting the global payments system. It also illustrates huge — and in some officials' eyes insurmountable — hurdles that Facebook will have to clear.

The report's authors warned that such projects could have "significant adverse effects" domestically and internationally on monetary policy, financial stability and efforts to combat money laundering. It could even pose challenges to monetary sovereignty, they said.

"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, through appropriate designs and by adhering to regulation that is clear and proportionate to the risks," the officials said in the report.

They added: "Depending on the unique design and details of each stablecoin arrangement, approval may be contingent on additional regulatory requirements and adherence to core public policy goals."

Facebook, which is trying to launch Libra as soon as next year with several partners, has said it will address regulatory concerns before implementing the new payments system.

The Libra Association, a Switzerland-based organization that Facebook spearheaded to manage the currency, released a statement Thursday night in Washington trying to reassure the regulators.

Libra said it "is committed to building a system that replicates or exceeds current standards for consumer protection, financial stability, and global cooperation to prevent money laundering while preserving national sovereignty over monetary policy."

The association defended the project. "The distributed governance of Libra is structured to provide more choice for consumers, greater access, higher interoperability and lower prices," it said.

Libra, it said, was "being designed to respect national sovereignty over monetary policy in the digital space, not undermine it."

French Finance Minister Bruno Le Maire told reporters in Washington after a G-7 meeting that his main worry was that "countries would lose their sovereignty to private interests and lose control of their monetary policy.” He said Germany shared that concern.

Asked if it’s feasible that Libra could roll out next year given those concerns. Le Maire said, “it’s up to Facebook to decide, but everybody should be aware that the G-7 members are aware of the risks of money laundering, terrorism financing, data limits to this Libra project.”

The so-called stablecoins that the G-7 is focused on attempt to stabilize their prices by linking their values to other assets or pools of assets. Libra, for example, is designed to be backed by a basket of existing currencies.

Katy O'Donnell contributed to this report.