G7 finance ministers and central bank governors reached a consensus: digital currencies need to be subject to the strictest supervision

The G7 believes that the technology giants' ambitions for digital currencies will not only weaken national control over monetary and banking policies, but will also bring security risks.

"In any case, possible 'stablecoin' initiatives and their operators will need to meet the highest standards of financial regulation, particularly in anti-money laundering/combating terrorist financing, to ensure that they do not affect the stability of the financial system or consumer protection." The Group of Seven (G7) Finance Ministers and Central Bank Governors Meeting reached the above important consensus in its summary report on the 18th local time.

The G7 task force set up by Benoit Coeure, a member of the European Central Bank's executive board, submitted an investigation report on Libra to the meeting, opposing private companies having the same privileges as countries in creating means of payment in the absence of supervision.

He also said that stablecoins similar to Libra have their merits, and that developers will need to further cooperate with the public and authorities in the future. The G7 working group is also willing to continue coordinating and negotiating with the G7 finance ministries, relevant standard-setting bodies and the Group of Twenty (G20).

In addition, the G7 countries confirmed for the first time that they had reached an agreement that taxation of large multinational corporations should be fairer, and agreed to introduce a minimum tax rate to prevent countries from "competing to lower" tax levels to attract technology giants to move in.

Digital currencies need to be regulated most strictly

Since Facebook announced on June 18 that its digital currency Libra would strive to expand beyond social networks and move towards e-commerce and global payments, governments have begun to worry that large technology companies are encroaching on government powers, such as issuing currency.

At the meeting, the G7 believed that the ambitions of technology giants for digital currencies would not only weaken the country's control over monetary and banking policies, but also bring security risks. French Finance Minister Bruno Le Maire said sternly: "We cannot accept private companies issuing their own currencies without democratic control."

Cole said at the conference that digital currencies such as Libra have both opportunities and risks. He believes that they can help poor people who cannot afford financial services, but they also need strict supervision to ensure their stability and security and do not encourage criminal activities.

"Global stablecoins for retail purposes could provide faster and cheaper remittances, stimulate competition in payments, thereby reducing costs and supporting greater financial inclusion," Cole said. "But they pose a number of risks related to public policy priorities, including anti-money laundering and combating the financing of terrorism, consumer and data protection, fair competition and tax compliance."

Therefore, Cole said stablecoins need to be held to “the highest regulatory standards and subject to prudential supervision and oversight.”

He said that it is necessary to further cooperate with digital currency developers and expand regulatory work in the future. "Developers need to further engage in cooperation with the public and authorities... The working group stands ready to coordinate with G7 finance ministries, relevant standard-setting bodies and the G20 to advance its work," he said.

Agree on minimum level of corporate tax

At the same time, the G7 also agreed that technology giants should be treated more reasonably on the issue of taxation, changing the current situation where large multinational companies reduce their tax obligations by registering in tax-favored countries. At the same time, countries should negotiate a common minimum tax rate to further ensure fairness.

The meeting concluded: "Taking into account the need to improve the current international tax framework without undermining its principles, the finance ministers agreed that the tax challenges arising from the digitalization of the economy and the shortcomings of the current transfer pricing system need to be urgently addressed. Therefore, the G7 ministers fully support the work plan endorsed by the G20 leaders to adopt a two-pillar solution by 2020."

Under the first pillar, countries would develop new rules to address new, highly digital business models, allowing companies to operate in a region without any physical presence, while enhancing tax certainty.

Under the second pillar, the summary states: "Minimum levels of effective taxation, such as the U.S. Global Intangible Low-Taxed Income (GILTI) regime, should be achieved to help ensure that businesses pay their fair share of taxes."

However, the meeting did not reach an agreement on specific tax rates. The G7 looks forward to making further progress in the context of the G20 and reaching a global agreement on the Inclusive Framework on Base Erosion and Profit Shifting (BEPS) by January 2020.

"This is real progress towards fairer taxation in the 21st century," Le Maire said.

Source: Sina Finance