At a meeting, the G7 finance ministers also decide how to proceed with cryptocurrencies. Above all, the German minister Olaf Scholz pleads for strict regulation – also and above all of Facebook’s Libra project, which is now to be called Diem. Apparently, stablecoins have roused governments.
Yeah, Libra. Or Diem, as the cryptocurrency planned by Facebook is now to be called . Diem should go live under the new name in spring 2021 , and it should not be tied to a currency basket as planned, but only to a dollar. Facebooks Libra was announced with in mid-2019, there remains nothing more than a dollar stablecoin supposed to run on an exotic, untested blockchain.
For politics, Libra and Diem are still a big upset. So big that the finance ministers of the G7 countries recently discussed it at a virtual meeting . The German Vice-Chancellor and Finance Minister Olaf Scholz said after the meeting: “A wolf in sheep’s clothing remains a wolf. It is therefore clear to me that Germany and Europe cannot and will not accept market entry as long as the risks are not adequately addressed by regulatory means. We are working flat out on this at European level. ” With this, Scholz stuck to the position he had already formulated in November at the European Banking Congress : He did not support “any digital currencies in the private sector.”
Scholz then revealed in a comment what it really is about: “We have to do everything we can to ensure that the currency monopoly remains in the hands of the states.” The finance ministers are not concerned about the privacy of Diem users, not about money laundering or the violation of regulatory provisions – but because they fear losing the currency monopoly.
Cryptocurrencies have, one could say, grown up: They are wresting the monopoly on the issuing of money from states. This has been known for a long time in the “scene”; Eric Vorhees coined the catchy phrase that Bitcoin separates money and state just as secularization separated church and state.
It is difficult to say why a project like Libra Diem scares the finance ministers so much. In comparison with cryptocurrencies such as Bitcoin, Ethereum or Tether, Diem is tamer: The Association makes the fate of stablecoins dependent on the OK of the supervisory authorities; It crushed its currency ambitions by switching to the dollar even before the start. Thanks to the strong, central actors, the coin should be as easy to regulate as payment service providers or banks.
Whatever the reason – the G7 finance ministers are determined to strictly regulate cryptocurrencies and stablecoins. According to a statement by the US Treasury Department, there is “a strong consensus among the G7 that we need to regulate digital currencies.” The Treasury Ministers agreed to reaffirm their joint October statement.
After a meeting in Tokyo, the G7 decided in October that “digital payment service providers must be adequately monitored and regulated”. They expressed concern that both public authorities – such as the Central Bank of China – and private companies (such as Facebook) are considering, planning or already implementing the issuance of digital currencies. Such initiatives threatened to challenge the international monetary system based on the dollar.
The G7 finance ministers and their central bankers recognize in the joint statement that digital payments can improve access to financial services and make them cheaper. But it is important to them that criminal activities such as money laundering are prevented. “No global stablecoin project should begin operations,” the statement said, “before it has adequately met the relevant legal, regulatory and supervisory requirements.”
The fact that the finance ministers limit this rigidity to stablecoins should be pleasant for the crypto industry. Depending on the perspective, this expresses a disdain for real cryptocurrencies – or an admission that one can only regulate what is issued by a central actor. But even with stablecoins, the reality of the markets has long since passed the finance ministers by when, for example, Tether or the makers of DAO issue dollar stablecoins without asking for permission.
It is doubtful that governments will simply put up with this. With the planned STABLE Act , the US government is currently preparing legally to criminalize stablecoins that do not meet regulatory requirements. Something similar can be expected in the EU. Given how important stablecoins have become for the crypto economy, there could be a real threat in this development.
