With the Group of Seven (G7) reaching agreement to push for the highest standards of regulation on Facebook Inc.’s proposed Libra digital currency, Japan plans to step up discussions on how to regulate and oversee the project that could offer faster and cheaper remittances.

A new group launched by the Financial Services Agency, the Bank of Japan and the Finance Ministry is leading the talks, with senior Japanese officials suggesting it include other authorities given the significant challenges posed by the social media giant’s latest scheme.

Since Facebook announced the project last month, officials in Tokyo and other G7 capitals have grown concerned that if a significant number of Facebook users were to quickly adopt Libra for retail payments it could affect the conventional financial system, which is based on banks, and undermine traditional roles of government such as issuing currency.

“The group has started comprehensive discussions on various aspects of (so-called) stable coins,” said Finance Minister Taro Aso after a two-day meeting of the G7 finance ministers and central bank governors that ran through Thursday in Chantilly, France, referring to Libra and other cryptocurrencies that are pegged to real currencies.

Unlike Bitcoin, Libra would have a stable value, Facebook says, because it will be pegged to a basket of major currencies such as the dollar, euro and yen.

Libra is backed by more than a dozen companies and organizations including Visa Inc., Mastercard Inc., Uber Technologies Inc. and Spotify Technology S.A. No banks are on the initial list of Facebook’s 27 partners on the project, which threatens to undermine their role as gatekeepers of the financial system.

Given Facebook’s global reach with its user base of 2.7 billion people — about a third of the world’s population — Aso said the scale of the project is “unprecedented,” and that issues surrounding Libra will be carefully studied across the Cabinet of Prime Minister Shinzo Abe.

Finance chiefs from the U.K., Canada, France, Germany, Italy, Japan and the United States plus the European Union have called for “the highest standards of financial regulation” over Libra and proposed cryptocurrency retail payments, to prevent potential money laundering, terrorist financing and other unlawful activity.

The action by the G7, with its “serious regulatory and systemic concerns,” casts doubt over the Silicon Valley technology giant’s plan to launch the digital coin as early as next year.

Citing Facebook’s “huge platform,” BOJ Gov. Haruhiko Kuroda referred to the possibility of significant impacts from the project on the global economy and finance.

Kuroda said that together with measures for financial stability, antitrust and privacy issues could be part of regulations, and suggested the inclusion of relevant authorities such as Japan’s Fair Trade Commission in the nation’s tripartite group.

Japan would not be immune to the potential impacts of Libra considering about 40 percent of the population use Facebook’s services, according to data from the Ministry of Internal Affairs and Communications.

A senior Finance Ministry official said that Japan is open to financial innovation, but that his immediate concern is that Libra — if launched without regulation — could facilitate money laundering and other illicit activities, and that cryptocurrency payments could affect monetary policy.

The official was referring to the risk that the widespread use of Libra would reduce cash settlements, influencing a central bank’s control of money supply and undermining the effectiveness of monetary policy.

The Libra project was announced amid a surge in cases of suspected money laundering linked to cryptocurrency in Japan. National Police Agency data show a total of 7,096 such cases were reported to police authorities in the nation in 2018, up from 669 cases reported in the shorter period between April and December 2017.

Additionally, experts have raised concerns that Facebook — which does not have a good record of protecting users’ data — may allow privacy breaches through inappropriate use of personal data.

“One of the emerging problems with electronic payments systems is that they convey huge and deeply personal information about market participants, and whoever controls the payments system has access to this information,” said Thomas Duesterberg, a senior fellow at Hudson Institute, a Washington think tank.

“Japan, for example, can contribute by pushing for a G7 agreement on how such systems should be subject to privacy concerns, and how to limit the loss of sovereignty inherent in private cryptocurrency systems,” he said.

He was alluding to G7 officials’ objection to allowing a private company the ability to create a sovereign currency, especially for use in poor countries with currencies that inspire little confidence.

Given Facebook’s dominance in Western social media, Duesterberg suggested that Japan could also take the lead in addressing competition concerns about the company’s entry into the new realm of crypto-assets and cryptocurrency payments.

The G7 will now coordinate with the broader Group of 20 economies, the Financial Stability Board, the Financial Action Task Force on Money Laundering and other relevant bodies in ensuring effective regulatory oversight of the Libra project.

A study by the Japanese tripartite group will be reflected in a final report on policy recommendations for stable coins set to be compiled by a G7 working group ahead of the annual meetings of the World Bank and the International Monetary Fund in October in Washington.

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