BoE Gov: Facebook’s Libra Will Need Regulation

Bank of England (BOE) Governor Mark Carney said Facebook’s newly-announced cryptocurrency, Libra, can’t be the same unregulated type of service that Facebook is, according to a report by Reuters.

“The Bank of England approaches Libra with an open mind but not an open door,” Carney said. “Unlike social media … the terms of engagement for innovations such as Libra must be adopted in advance of any launch.”

Carney’s remarks are part of a planned speech with Finance Minister Philip Hammond, who is expected to talk about the dangers a no-deal Brexit could cause, one of which might be a vote for Scottish independence.

Hammond also wants to make sure London remains the leading financial district in the world, even after the U.K. separates from the European Union. One thing he wants to do right away is to enhance the coordination between financial regulators in the country.

“To remain a dominant player we in the U.K. must do what London’s markets have always done: evolve,” Hammond said.

Carney’s comments were part of a larger speech that discussed a major review of Britain’s future financial system, with the aim of cutting costs for customers and making it easier for smaller businesses to borrow money, as well as reducing compliance costs for banks.

As for Libra, Carney said it needs to be watched closely and carefully. The cryptocurrency would have to meet stringent standards regarding protecting customers and also in terms of preventing money laundering. Also, he said, it would have to be actually open so “new users can join on equal terms.”

Carney also wants BOE, which allows a few non-banks to use its payment services, to be the first to let non-banks deposit money in it overnight, rather than relying on banks.

“Expanding access can improve the transmission of monetary policy and increase competition,” Carney said.

Carney also noted in published remarks, according to Coindesk, that consortia “propose to issue digital tokens that are fully backed by central bank money, allowing instant settlement.” He noted that projects with distributed ledger technology (DLT) could unlock “billions of pounds in capital and liquidity.”

The BoE governor continued, “This could also plug into ‘tokenised assets’ — conventional securities also represented on blockchain — and smart contracts. This can drive efficiency and resilience in operational processes and reduce counterparty risks in the system, unlocking billions of pounds in capital and liquidity that can be put to more productive uses.”