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EU fires Libra warning

EU fires Libra warning

In the latest shot across the bow of Facebook's Libra project, European authorities are warning that no global stablecoin systems will be allowed to operate in the EU until legal, regulatory and oversight issues have been addressed.

Libra has faced a barrage of push-back from politicians and regulators since it was unveiled by Facebook and its partners earlier this year, prompting the likes of Visa, Mastercard, PayPal and Stripe pull out the project.

Echoing, among others, the G7 working group on stablecoins, the European Commission and the European Council (comprised of the leaders of EU member states), have made clear their concerns about any such initiative.

In a statement, they acknowledge some of the potential benefits of stablecoins but also warn about risks, including on consumer protection, privacy, taxation, cyber security, money laundering, terrorism financing, market integrity, governance and legal certainty.

When it comes to global stablecoin efforts, even bigger concerns - such a monetary sovereignty and financial stability - come into play.

Without naming names, the statement says: "Some recent projects of global dimension have provided insufficient information on how precisely they intend to manage risks and operate their business. This lack of adequate information makes it very difficult to reach definitive conclusions on whether and how the existing EU regulatory framework applies."

Any entity that wants to work with stablecoins in the EU should provide all the necessary information "urgently" so that an assessment against applicable existing rules can be made, say the two groups.

If the current rules are not adequate for the stablecoin era, the Commission and Council say they will work "swiftly" with others to develop an EU-wide approach to the issue.

Until then "no global 'stablecoin' arrangement should begin operation in the European Union until the legal, regulatory and oversight challenges and risks have been adequately identified and addressed".

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