Digital currencies like Facebook’s Libra must be held “to the highest regulatory standards” to ensure they are not used to launder money and that users are protected, a Group of Seven taskforce urged on Thursday.
The conclusions came as G7 finance ministers meeting in Chantilly, France, agreed to address tax challenges raised by the digital economy and to push ahead with plans for a minimum corporate tax level, according to a draft summary of the two-day meeting.
The Chantilly talks were dominated by exchanges on Facebook Inc’s plans for digital coin Libra, amid deeper concerns by policy-makers that the powers of big tech companies encroach on areas belonging to governments, like issuing currency.
“Everybody is in a place where we recognize that new technologies can provide advantages,” Canadian Finance Minister Bill Morneau told Reuters.
“But people want safe and cheap, not just cheap. And so our job is to think about safe too […] We’ve got an emerging sense that we need to work together on this.”
Concerns include the fear that Facebook’s ambitions for a digital currency could weaken their control over monetary and banking policies and pose security risks.
“A global stablecoin for retail purposes could provide for faster and cheaper remittances, spur competition for payments and thus lower costs, and support greater financial inclusion,” European Central Bank board member Benoit Coeure, chairman of the taskforce, told the G7 meeting.
“However, they give rise to a number of risks related to public policy priorities including anti-money laundering and countering the financing of terrorism, consumer and data protection, cyber resilience, fair competition and tax compliance.”
Bank of France head and European Central Bank policymaker Francois Villeroy de Galhau said financial regulators will not sacrifice customers’ security for the sake of innovation.
“Financial regulators are favorably towards innovation. But that cannot come to the detriment of the security of the consumer,” Villeroy said on Thursday, adding that regulators wanted “answers” to their areas of doubt over Libra by October.
Regulators and governments have called on Facebook to respect anti-money laundering rules and ensure the security of transactions and user data.
A separate concern at the meeting was how best to tax big tech companies, with France keen to use its G7 presidency to garner support for minimum corporate taxation to prevent tech companies from seeking out low-tax countries to book profits.
“Ministers agreed that a minimum level of effective taxation, such as for example the U.S. GILTI regime, would contribute to ensuring that companies pay their fair share of tax,” the chair summary seen by Reuters concluded.
The U.S.’s global intangible low-taxed income regime (GILTI) overseas aims to subject overseas intangible income to 10.5 percent to discourage companies from shifting profits abroad instead of the nominal U.S. corporate tax rate under the Trump tax cuts of 21 percent.
The meeting comes amid growing global economic uncertainty as U.S.-China trade tensions and slowing trade threaten to undermine a prolonged recovery.
Japanese Finance Minister Taro Aso said the G7 finance leaders still considered valid an assessment made by the bigger G20 gathering that the global economy remained on track for a recovery.
“There was an agreement (among the G7 members) that the global economy will likely recover through next year,” Aso said after Wednesday’s meeting.
What is a crypto-currency?
Virtual currencies can be used to pay for things in the real world, such as a hotel room, food or even a house.
Digital tokens are held in online wallets, and can be sent anonymously between users.
Crypto-currencies run on blockchain technology. A blockchain is a ledger of blocks of information, such as transactions or agreements, that are stored across a network of computers.
This information is stored chronologically, can be viewed by a community of users, and is not usually managed by a central authority such as a bank or a government.
The concept was designed to ensure security and anonymity for users, by preventing tampering or hijacking of the network.