Bitcoin and other early cryptocurrencies have failed as “attractive means of payment or for preservation of value,” according to a new report from the G7 and the Bank for International Settlements (BIS).
However, the October report notes that widespread asset-backed cryptocurrencies or stable coins such as Libra pose a growing threat to monetary policy, financial stability and competition.
Generally accepted stable currencies, referred to in the report as “global stable currencies,” have the potential to reach an international audience and have “significant adverse effects” on the current economic system.
Meanwhile, “[first-generation cryptocurrencies like Bitcoin] suffered from very volatile prices, scalability constraints, intricate user interfaces, and governance and regulatory issues. Cryptoassets have therefore emerged more as a highly speculative investment category for certain investors and those who have engaged in illegal activity than as a payment method. “
The taxonomy of stable coins – defined as a cash equivalent, contract or title or right of an issuer to an asset – remains an important legal issue for now, the report said. The impact of stable coins on existing monetary systems such as bank transfers still needs to be fully understood.
Although stable coins can offer faster, cheaper and more comprehensive payments, they can “only be realized if significant risks are addressed”.
In a footnote, the G7 report states that the Libra Association’s resolution of the Libra Association, which is overseen by the Geneva regulatory authority, complies with the G7 recommendations on stable currencies.
FINMA has recently stated that the balance emphasizes the need for international coordination and “appropriate prudential requirements” for all services offered through a payment system.
The report on stable currencies was prepared at the request of the G7 in July shortly after the Libra was launched in June. Although the report clearly focused partially on the project, he only mentioned the balance in a footnote.
In response to the G7, the Libra Association sent a memo on Friday stating that the stable coin “is not meant to change the role and influence of central bankers,” adding:
“Portfolios and other financial services in the Libra network (including exchanges and other entrances and exits) must comply with regulations such as local capital controls, which can be adjusted to allow large-scale flights from local currencies to the balance-side currencies.”