'Stable coins' could hinder efforts to stamp out money laundering

Facebook unveiled Libra in June as part of its push into e-commerce and global payments


Reuters October 18, 2019
Stable coins cut out the need for regulated middlemen and hinder efforts to halt criminal use, says FATF. PHOTO: REUTERS

LONDON: The spread of crypto currencies such as Facebook's Libra could have serious repercussions for worldwide efforts to detect and stamp out money laundering and terror financing, a global watchdog on illicit finance said on Friday.

"Stable coins" - digital currencies typically backed by traditional money - could spark the mass adoption of crypto currencies and peer-to-peer transfers, cutting out the need for regulated middlemen and hindering efforts to halt criminal use, the Financial Action Task Force (FATF) said.

In comments that underscored global unease about the emergence of Libra, the Paris-based FATF said both stable coins and the companies behind them would be subject to global standards on crypto currencies and traditional financial assets.

"If stable coins were to become widespread, it could potentially lead to new risks regarding money laundering and terrorist financing," FATF president Xiangmin Liu told reporters in Paris.

Facebook's Libra currency abandoned by major financial companies

"It is our job to ensure the new risks in connection with stable coins will be adequately addressed."

Stable coins are designed to overcome the wild price swings that have rendered bitcoin and other crypto currencies impractical both for commerce and payments and as a store of value.

Facebook unveiled Libra, a stable coin backed by currencies from the dollar to the euro and government debt, in June, as part of its push into e-commerce and global payments.

It says Libra, which would be the highest profile move to drag crypto currencies into mainstream finance and commerce, could boost access to financial services in developing countries and addresses the high costs and lengthy transfer times common in most global payments systems.

But global regulators and politicians have voiced concerns about, due for launch by June 2020.

The Group of Seven wealthy nations said on Thursday stable coins such as Libra should not be allowed to launch until the risks they pose are addressed. When launched on a wide scale, stable coins could threaten the world's monetary system and financial stability, it said.

FATF, a body launched three decades ago, said it would report on stable coins to finance ministers and central bankers from the Group of 20 developed countries next year.

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