G20 sets ground rules ahead of Facebook’s Libra

london — The world’s leading economies need to plug gaps in their rulebooks to avoid digital currencies like Facebook’s planned Libra stablecoin from undermining financial stability, the Group of 20 Economies’ (G20) regulatory watchdog said on Tuesday.

Stablecoins are tied to a traditional currency or basket of assets, and used for payments or storing value.

The G20’s Financial Stability Board (FSB) set out 10 recommendations on Tuesday for a common, international approach to regulating stablecoins, prompted by social media giant Facebook proposing its Libra stablecoin. They should face the same rules as other businesses that present the same risks, regardless of technology used, it said.

Existing financial rules, such as for payments and customer checks, generally apply in whole or in part to stablecoins and address at least some of the risks they generate, the FSB said.

Coverage, however, can be patchy from country to country, exposing gaps for supervising a crossborder stablecoin, the FSB said. The recommendations propose flexible, cross-border cooperation to avoid a stablecoin playing off one jurisdiction against another.

Stablecoin operators must effectively manage risks, be operationally resilient, have safeguards against cyber attacks, and systems for stopping money laundering and terrorist financing, the FSB said.

Several of Libra’s major backers, including Visa, Mastercard and PayPal, have since dropped out after scepticism from regulators and central banks, which said it must not be launched until adequate rules are in place.

Existing stablecoins, many of which are available internationally, are still small in scale and pose no risks to financial stability, but this could change if use significantly increased, the FSB said.

The largest, Tether, with a market capitalisation of around $6.3 billion, it still a fraction of the size of bitcoin. It is little used beyond the world of cryptocurrency trading. —