Breaking: Facebook's Libra can't happen unless it's regulated according to newest G7 draft
|- G7 is an international economic organization consisting of seven major countries.
- The next meeting is set to happen this Tuesday with opposition to the launch of Facebook's Libra stablecoin.
The recently released draft showed that the plan is to oppose the launch of Libra because there is a need to adequately address all the legal, and regulatory requirements first. The FSB recommendations back in April 2020 were aimed at the regulation of stablecoins internationally. The G7 draft states:
The G7 continues to maintain that no global stablecoin project should begin operation until it adequately addresses relevant legal, regulatory, and oversight requirements through appropriate design and by adhering to applicable standards
Since the announcement of the launch of Libra, many regulatory bodies have been against it. The main idea behind the stablecoin is to maintain its value utilizing multiple currency reserves, however, this is often viewed as a bad plan as it could destabilize the underlying currencies. Back in June 2020, the Federal Reserve stated:
Our model shows that although the basket may have the potential to become important and globally demanded, [the regular ebb and flow of fiat value and trade] make it such that the basket never dominates either of the component currencies
Stablecoins are often criticized
One of the most controversial and popular stablecoins is Tether (USDT). The coin has a market capitalization of $15.7 billion and usually, it's the leader when it comes to trading volume. The idea behind USDT is to back it with one United States dollar, however, the company was never able to fully prove it.
On April 30, 2019, the lawyer of the company actually claimed that each tether was only backed by $0.74 and not a full dollar. Additionally, he also stated that the $0.74 was cash and cash equivalents. The company's failure to provide the promised audits led many people to believe that it was a fraud.
Since the release of Tether, many other companies, and well-known exchanges have created their own. True USD (TUSD) is similar as it is backed by the U.S. dollar. Others, like the USD Coin (USDC), are backed by exchanges, in this case, Coinbase. Additionally, there are also stablecoins backed by gold, DigixGlobal, is a Singapore-based company that created DGX, a token with the value of 1g of gold.
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