By
Chimamanda U. Martha
April 12th, 2024
France decided to create a G7 taskforce in order to examine the ways how central banks can regulate Facebook’s Libra.
France’s central Governor Francois Villeroy de Galhau announced creating a G7 task force to study how central banks ensure cryptocurrencies like Facebook’s Libra are governed by regulations ranging from money-laundering laws to consumer-protection rules. He said:
“We want to combine being open to innovation with firmness on regulation. This is in everyone’s interest.”
He added that the concept of a “stable” cryptocurrency still needs to be defined. He explained that this refers to what such instruments are stable against and how fixed their exchange rates are needed to be determined.
Villeroy also called for a network of national anti-money-laundering authorities, coordinated by the European Banking Authority, to carry out emergency measures and even substitute for national authorities, rather than creating a specialized European agency.
Even though France is not against Facebook creating a financial instrument ‘per se’, it has been passionately against Libra becoming a sovereign currency.
Concerns have been raised over how to ensure cryptocurrencies comply with anti-money laundering laws, consumer protection rules and other regulatory matters.
Just for reminder, Facebook presented its Libra project earlier this week, saying the main reason for this cryptocurrency is “ to bank the unbanked and facilitate low-fee money transfers globally”.
France’s finance minister Bruno Le Maire argued with this measure saying that Libra “can’t and must not happen” and that “it is out of question’’ for the cryptocurrency to “become a sovereign currency.” He also allegedly called on the G-7 central bank governors and guardians of the global monetary system to review the social media giant’s cryptocurrency project and submit a report next month.
Facebook’s announcement drew a lot of, mostly negative, reactions. We already wrote of how US Senate Banking Committee announced they will be holding a hearing next month to question witnesses over Libra.
Also, a senior Russian official said the country will not legalize Libra because it could threaten the nation’s financial system. Bank of England Governor Mark Carney said Libra had to be safe or it would not happen, and that the world’s major central banks would need to have oversight.
Be it as it may, the truth is US and Swiss regulators have a central role as they will be setting standards for know-your-customer, anti-money laundering and financial stability requirements.