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G7 will oppose Libra launch until regulations in place

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Countries representing the world’s largest economies said in a draft of a statement that they would initially oppose the launch of Facebook’s Libra project.

According to an Oct. 12 report from Reuters, central bankers and finance ministers from the United States, Canada, Japan, Germany, France, Italy, and the U.K (also known as the Group of Seven, or G7), said it would halt global stablecoin projects pending appropriate regulatory oversight.

The draft stated:

“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.”

The statement comes from representatives of the seven countries, assembled in June 2019 to examine how central banks can regulate cryptocurrencies. The group has raised concerns over how to ensure digital assets comply with anti-money laundering laws, consumer protection rules and other regulatory matters. A G7 report last October stated that “global stablecoins” posed a threat to the global financial system.

As a result, Facebook’s Libra stablecoin may not get approval from the necessary regulators. Cointelegraph reported last year that France had teamed up with Germany, Italy, Spain and the Netherlands to prevent Libra from launching in Europe. In April, the G20’s Financial Stability Board issued a comprehensive stablecoin study, presenting 10 recommendations to regulate them effectively.

The G7 draft also included the group’s concern over ransomware attacks, which it states “jeopardize essential functions along with our collective security and prosperity.” Such attacks have been on the rise in countries including the United States, France, Germany, Greece, and Italy since the start of the pandemic earlier this year.



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Regulation

New York authorizes first Yen stablecoin operator in the US

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New York has given the first authorization to a stablecoin backed by the Japanese Yen to operate in the U.S.

Per a Dec. 29 announcement, the New York Department of Financial Services has granted Japanese firm GMO-Z.com a charter to handle U.S.D. and Yen-backed stablecoins in New York. 

Given New York’s status as a global center, the NYDFS is the most prominent state financial regulator in the U.S. It is also one of the most aggressive. A pass to operate in New York often opens up the rest of the country. 

GMO’s charter is as a limited liability trust company rather than a full bank, the principle difference being in authorization to handle deposits. While a stablecoin operator typically needs the ability to hold reserves of the pegged asset, GMO’s charter limits its rights to hold other kinds of deposits not central to its ability “to issue, administer, and redeem” its stablecoins. 

The right to issue such non-depository charters has been a bone of contention between state regulators like the NYDFS and national banking regulators in the U.S. 

GMO president and CEO Ken Nakamura said: “We’re breaking ground with our move to issue the first regulated JPY-pegged stablecoin, which many see as a safe haven asset.” 

The NYDFS recently made changes to its famous BitLicense, including a conditional format that buddies up newly licensed firms with existing licensees. The first conditional BitLicense went to PayPal, facilitating the launch of its new crypto services earlier this fall with the help of longstanding licensee Paxos.