In the world of central bankers, there are hughley divided opinions on cryptocurrencies, and especially, central bank digital currencies. Some believe that there is a future for stablecoins issues by central banks in order to move with the times, while others are still skeptical.
One thing that has become clearer this year however is that most of the central bankers and finance ministers – particularly in the G7 – are highly against a private entity launching a stablecoin. Facebook and its Libra project has caught the ire of many different nations.
Now, The G7 group of nations has reportedly drafted a report which says that “global stablecoins” pose a threat to the global financial system, cleary in reaction to Libra. However, this notion also starts to call into question other stablecoins that have escaped scrutiny.
The report goes on to outline the problems and threats posed by stablecoins, and even notes that of these concerns are addressed, the coin may still not be guaranteed approval.
“The G7 believe that no stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks are adequately addressed. […] Addressing such risks is not necessarily a guarantee of regulatory approval for a stablecoin arrangement,” the report reads.
The G7 also states that global stablecoins with the potential to scale rapidly could stifle competition and threaten financial stability if users lose confidence in the coin.
One aspect that was not brought up in this report however was the emerging move by banks to create and use their own stablecoins. JPMorgan, once a strong anti-cryptocurrency campaigner, has launched its own stablecoin. Wells Fargo is another one that has followed suit.
Currently, these coins are still internally used and mostly in pilot stage. However, they have been discussed for use at a client level. This stablecoin, introduced by banks, and backed by fiat currency, is very similar in makeup and application as Libra, yet is not under any of the same scrutiny.
Of course, banks do have much stricter and more stringent regulations to adhere to when dealing with money – whatever form it is in – but it still seems as if they are getting a lot of leniency from regulators and central bankers on this note.