Finance ministers of the G7 leading industrialized nations meet in Chantilly, France, on July 17 and 18, and the potential risks of Libra, a new global digital currency Facebook plans to launch with partners next year, are high on the agenda. A G7 working group has been studying challenges Libra and other digital currencies could pose to regulatory efforts to fight money laundering, terrorist financing and tax evasion.
Libra has faced scrutiny in the United States this week as well. Facebook’s top executive for the project, David Marcus, is scheduled to appear Tuesday before the Senate Banking Committee, which released his written testimony in advance. In it, he states that Libra would be regulated by Swiss banking authorities and would not compete with national currencies or monetary policy.
U.S. Treasury Secretary Steven Mnuchin told reporters on Monday that so far, he’s not comfortable with Libra because of concerns about money laundering and other potential illicit uses of the digital currency. House Democrats meanwhile plan to introduce legislation to block large tech firms from issuing digital currencies.
Facebook has promised that Libra will be launched with “strong protections in place” to keep users’ money and information safe. But critics worry about a new digital currency being managed by an enormous private company, not a central bank or national government. Martin Chorzempa at the Peterson Institute for International Economics pointed out that “Facebook already has around 2.4 billion users and has been implicated in a host of issues around privacy and data protection.”
Libra could make international money transfers easier and cheaper, said Cornell professor Eswar Prasad, which could facilitate both legal and illegal transactions: “For Mexican workers to make remittance payments back home, but equally for Mexican drug lords to transfer money across national borders.”