Libra Project: Regulators Act on Global Stablecoins
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DOI: 10.1007/s10272-020-0936-7
Oliver Read and Stefan Schäfer
Libra Project: Regulators Act on Global Stablecoins Governments, regulatory authorities and standard-setting bodies started acting on global stablecoins triggered by the Libra announcement. Among the concerns expressed by the G7 and the G20 are risks to the stability of the financial system. The Financial Stability Board and the Financial Action Task Force have worked on regulatory issues and antimoney laundering ahead of the G20 summit in November 2020. Overall the Libra project has raised many questions on the regulatory front. Facebook had to revise the concept as Libra 2.0 and resubmit it for approval in April 2020. The European Commission announced a new regulation on Markets in Crypto-assets (MiCA) including stablecoins in September 2020 as part of a new Digital Finance Package. This opens the next chapter in a regulatory cat and mouse game.
“Libra’s mission is to enable a simple global currency and financial infrastructure that empowers billions of people” (Libra Association, 2019a, 1). On 18 June 2019, the Libra project, Facebook’s new cryptocurrency structured as a ‘stablecoin’, was announced with an intended launch in early 2020 (Brühl, 2020, 54). The internet services provided by the Facebook group (including Facebook, Instagram, WhatsApp, Messenger) have a global reach of almost 3 billion users, alone 2.4 billion via Facebook. Not surprisingly, regulators and central banks at the international level have been concerned by the potential impact on investor protection, financial stability and market integrity (European Securities and Markets Authority, 2019, 33). Stablecoins The term stablecoin, as used by market participants, denotes crypto-assets that are supposed to have a stable © The Author(s) 2020. Open Access: This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (https://creativecommons.org/licenses/by/4.0/). Open Access funding provided by ZBW – Leibniz Information Centre for Economics.
Oliver Read, Wiesbaden Business School, Hochschule RheinMain University of Applied Sciences, Germany. Stefan Schäfer, Wiesbaden Business School, Hochschule RheinMain University of Applied Sciences, Germany.
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value over time (ECB Crypto-Assets Task Force, 2019, 14). The rise of stablecoins has been driven by the criticism on the significant volatility seen in the price of cryptocurrencies. Before 2019, stablecoins slowly started drawing the attention of researchers and regulators, especially in connection with central bank digital currencies, digital money and cross-border payments (Mancini-Griffoli et al., 2018). Bullmann et al. (2019, 9) define stablecoins as “digital units of value that are not a form of any specific currency (or basket thereof) but rely on a set of stabilisation tools which are supposed to minimise fluctuations of their price in such currency”. To categorise stablecoins, the authors use three criteria of crypto-assets: (i) existence of an issuer that is responsible for satisfying
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