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The G20, a global forum comprising of central bank governors and governments from 19 countries and the European Union, is scared of the economic and sovereign implications of cryptocurrency especially stablecoins, a situation that made the group seek clarity from the International Monetary Fund.
In a press statement from Japan Friday, the group of 20 finance leaders unanimously agreed that stablecoins exposes world economy to regulatory and public policy and regulatory risks.
Upon ascertaining the economic risks, the financial group decided to bring the IMF into the issue, calling the organisation to have deep examination of the macro-economic implications and monetary sovereignty problems attached to the cryptocurrency.
“We ask the IMF to examine macroeconomic implications, incliding monetary sovereignty issues in its members of global stablecoins,” G20 demands.
The G20 members which are listed below have gone to the International Monetary Fund (IMF) and asked for help in establishing the implications of stablecoins.
The group comprises of United States, the United Kingdom, Turkey, South Korea, South Africa, Saudi Arabia, Russia, Mexico, Japan, Italy, Indonesia, India, Germany, France, China, Canada, Brazil, Australia, Argentina and the European Union.
The G20 is not oblivious of the economic impacts of financial innovations, but it declared that stablecoins poses more threat to world economy and put countries at risks of money laundering and illegal financing, among others.
Pointing further, the G20 said before stablecoins are allowed, they need to be examined and economically evaluated.
On October 18, Italy, France and Germany have said they would be working against the adoption of Facebook’s Libra, the stablecoin is pushing governments across the world to rethink their financial regulations.
Last week several financial giants pulled out of Libra association after they were threatened with stiffer regulatory procedures for their involvement in Facebook’s stablecoin.
When Libra whitepaper was unveiled in June the U.S congress man demanded some explanations from Facebook, the social media giant said to be spearheading the cause.
However, till today, they are still not satisfied with the cryptocurrency upon some explanation by David Marcus, head of Calibra.
G7 Threatens Facebook’s Libra
Thursday October 17, G7 comprising of Germany, Italy, Canada, Japan, France and United States independently threatened to block every move by Facebook’s Libra. The threat, preceded G20’s
The wealthy nations, with some of them included in the G20, said Facebook’s stablecoin should not be entertained anywhere in the world until the propounders solve the international risks attributed to the stablecoin and its likes.
The innovation, G7 said, could hinder efforts geared towards curtailing illicit fund movement and terrorist financing if not regulated and checkmate.
The G7 task force, lead by EU board member Benoit Coeure, said stablecoins should not be launched until every glitches with regulators are cleared.
For private firms designing stablecoins, they are compelled to solve legal and regulatory issues with appropriate regulators.
IMF Already Looked into Cryptocurrency and Stablecoins
While G20 is demanding that IMF looks into the economic implications of stablecoins, it is worth nothing that the financial organization already did a long time ago.
Over the years, IMF has published several researched papers to enlighten governments and central banks across the world on the need to adopt cryptocurrency especially stablecoins.
The former IMF Managing Director, Christen Lergade, at the Singapore Fintech Festival presented a paper titled “Winds of Change: The Case for New Digital Currency”. In the paper, she presented the positive impacts of cryptocurrencies on the world’s economic.
At the festival, Lergade mentioned cryptocurrency like Ripple, Ethereum and Bitcoin and how they try to offer “stable value, and quicker, cheaper settlement”.
She reminded the world that IMF released a new paper to tackle every issues about “digital currency”, but said the paper looked more into domestic rather than the cross-border effects of cryptocurrency.
On financial inclusion, Lergade said cryptocurrency presents great hope in this arena by reaching people in marginalized environments.
It is worth noting that Lergade, is now the head of European Central Bank. In fact, during her a discussion with the Economic and Monetary Affairs Committee of the European Parliament, the financial expert enjoined financial regulators and central banks to welcome cryptocurrency as it present many opportunity.
Lagarde said:
”In the case of new technologies – including digital currencies – that means being alert to risks in terms of financial stability, privacy or criminal activities, and ensuring appropriate regulation is in place to steer technology towards the public good. But it also means recognizing the wider social benefits from innovation and allowing them space to develop.”