Leaders of the G7 group of nations have opposed the launch of Facebook’s Libra stablecoin until it is properly regulated.

A statement prepared for a meeting of finance ministers and central bankers of the United States, Canada, Japan, Germany, France, Italy and the UK, said that digital payment services had to be appropriately supervised and regulated so that they would not undermine financial stability, consumer protection, privacy, taxation or cyber security.

Without proper supervision, such stablecoins could be used for money laundering, terrorist and proliferation financing, could compromise market integrity, governance and undermine legal certainty, read the statement seen by Reuters.

“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,” it stated.

In April, the G20’s Financial Stability Board set out 10 recommendations for a common, international approach to regulating stablecoins, prompted by Facebook’s work on the Libra digital currency and wallet.

Several G7 nation monetary authorities are exploring the opportunities and risks associated with central bank digital currencies (CBDCs). The European Central Bank stated this month that it should prepare to issue a digital euro to complement banknotes, while the Bank of England has launched consultations on a digital sterling.

The G7 statement also expressed concern about the threat of ransomware attacks, which are on the increase as COVID-19 has shifted economic activity online.

“These attacks, which often involve payments in cryptoassets, jeopardise essential functions along with our collective security and prosperity,” it noted.

Responding to the statement, Todd McDonald, co-founder at global blockchain firm R3, said that the wider implication is that G7 regulators would be open to single currency zone stablecoins, since they can fit within one regulatory and monetary policy regime. “In this regard, the statement is a positive development for CBDCs and also for well-crafted single currency stablecoins that can launch via regulated entities.”

Stablecoins are slowly being recognised as a token type that can co-exist with CBDCs once the correct regulatory landscape is in place. It is the manner in which Libra underestimated the global regulatory challenge that posed the biggest barrier to launching, argued McDonald.

“In reality, Libra has done little, if anything, to seriously address the calls from regulators following its announcement,” he commented. “Another major barrier is that big tech companies come to the stablecoin space with lots of baggage – for instance, they need to explain how they will handle data transaction privacy to guarantee that payments data doesn’t just become another offering in their business model.”

McDonald concluded: “Stablecoins must be regulated, but this will need to happen within individual regulatory frameworks before they can be rolled out on a global scale – we have Libra to thank for pushing regulators to set out the rules whilst these new assets are in their infancy.”

Separately, Libra hired another former HSBC banker to its executive team this week, naming Ian Jenkins as chief financial officer and chief risk officer.

He joins former HSBC Europe chief executive James Emmett, who was appointed managing director of Libra Networks last month, and HSBC veteran Stuart Levey, who came on board as chief executive earlier this year.

Jenkins has served in a variety of c-suite executive positions in finance, risk and operations within the banking sector. He previously served as the deputy group finance director and chief financial officer for Europe at HSBC, chief risk officer at Abbey National and latterly Santander UK, as well as Asia Pacific chief operating officer at Credit Suisse.

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