Facebook`s planned Libra cryptocurrency faces tough time; G7 urges tough regulation

Expressing serious concern over digital currencies including Facebook`s planned Libra, Group of Seven (G7) finance ministers and central bankers have talked about regulating them tightly to ensure that they do not upset the world`s financial system during informal G7 talks in Chantilly, north of Paris, said a Reuters report.

Finance Minister Bruno Le Maire of France, which holds the rotating presidency of the G7 top world economies, told a news conference that the group opposed the idea that companies could have the same privilege as nations in creating means of payment - but without the control and obligations that go with it.

In a summary of the informal G7 talks in Chantilly, the French presidency reportedly said the ministers and governors had agreed that "stablecoins and other various new products currently being developed, including projects with global and potentially systemic footprint such as Libra, raise serious regulatory and systemic concerns".

Notably, the G7 are concerned that Facebook`s ambitions for a digital currency might not only weaken their control over monetary and banking policies but also pose security risks. The G7 also agreed that large tech companies such as Google, Amazon , Facebook or Apple can be taxed in the countries in which they make money, even without being physically present there, the report said.

Several European countries, including France, Italy, Britain and Spain, have already introduced their own taxes on digital companies or plan to do so. 

US lawmakers challenge Facebook over Libra plan

US lawmakers bashed Facebook on Wednesday over its planned cryptocurrency, after a bruising first bout a day earlier when senators from both parties condemned the project, saying the company had not shown it could be trusted. Facebook is fighting to get Washington on its side after it shocked regulators and lawmakers with its announcement on June 18 that it was hoping to launch a new digital coin called Libra in 2020.

The social media company has faced criticism from policymakers and financial watchdogs at home and abroad who fear widespread adoption of the digital currency by Facebook`s 2.38 billion users could upend the financial system. 

Facebook has stated that its digital wallet subsidiary Calibra will be carrying out compliance checks on customers who want to sign up. But the US lawmakers are also concerned about the impact Facebook`s entry into financial services through Libra could have on financial stability, and how the company will protect users` payments data, said Reuters report.

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Smaller cryptos feel pain 

Bitcoin hasn`t been the only casualty of the backlash by the world`s major economic powers against Facebook`s plans for a cryptocurrency, with smaller digital coins also feeling the burn. Bitcoin has slumped around 30% from 18-month highs of nearly $14,000 touched after Facebook`s move, following a growing chorus of concern among regulators and politicians from the United States to Europe at the social media giant`s plans. 

The second-biggest coin Ethereum has slumped by nearly half. The third largest, Ripple`s XRP, is down by around 40%, while Litecoin and Bitcoin Cash have slumped by 40% and 42% respectively.

Notably, after Facebook unveiled its Libra, bitcoin soared as much as 55% in just nine days as investors bet the social media giant`s gambit would herald mass adoption of cryptocurrencies. The top four altcoins also soared, climbing between 10% and 33%.