The Bank of England’s (BoE) Financial Policy Committee (FPC) has laid down a set of strict rules that Facebook’s Libra and other cryptocurrencies must follow in order to do business in Britain, Reuters reported on Wednesday (Oct. 9).
“Libra has the potential to become a systemically important payment system,” the BoE’s FPC said in a policy statement. “The terms of engagement for innovations such as Libra must be adopted in advance of any launch. U.K. authorities should use their powers accordingly.”
Regulations include transparency that shows economic fortitude.
“Libra has the potential to become a systemically important payment system,” the committee said.
The FPC also said Britain’s financial network is ready for a worst-case Brexit, but that some level of disruption is anticipated, especially for EU borrowers.
Crypto wallets will be considered bank accounts and will be subjected to rules like deposit insurance and cash flow.
The FPC will exercise current authoritative “tools” instead of adopting new rules.
The “rules of engagement,” as the BoE calls them, shows that financial institutions are taking digital currencies like Libra seriously.
BoE Governor Mark Carney said in May that the central bank should gear up for a “fourth industrial revolution” that includes at least some impact to payments, chiefly through blockchain and decentralized systems.
The bank will also foster innovation among FinTech firms, Carney said at the Innovate Finance Global Summit. He noted that “new finance can unlock more sustainable and inclusive growth, provide consumers greater choice, [provide small business (SMB)] access to credit to grow – all of which ensures the financial system can become more resilient.”
Facebook announced its Libra project in June and said it will be a “global currency and financial infrastructure” powered by a version of blockchain, the technology that underpins bitcoin.
The Libra project has received widespread backlash from politicians and regulators, with the European Central Bank warning that Libra could limit its powers to set monetary policy.