The Bank of England’s quarterly report has specifically addressed the prospect of Facebook’s proposed Libra cryptocurrency being launched in the UK in coming months. The social media giant officially announced its cryptocurrency plans back in June. Libra is being set up as a theoretically independent non-profit structure managed by an association of financial backers including Starbucks and Spotify. It plans to first launch in developing economies with, at least so says Facebook, the aim of providing basic financial services to the world’s ‘unbanked’.
But that is, of course, just the beginning. Facebook’s general aim is for Libra to become a de-facto world digital currency. Users of the social media platform will be able to send Libra coins to one another as well as use it to make purchases both through Facebook and across the internet more broadly.
The scale of the ambition for Libra has seen the Bank of England’s Financial Policy Committee describe it in the quarterly report as having the potential “to become a systemically important payment system.”
As such, the Bank also insists that for a UK launch, Libra would have to meet the “highest standards of resilience”.
Politicians, central bankers and regulators around the world have voiced concerns about whether has the capability to suitably protect the personal financial information Libra will entail. That concern is not lessened by the company’s patchy record when it comes to the use of user data gathered through its social media platform.
Bank of England governor Mark Carney has previously commented when Libra was first publically announced in June:
“Unlike social media, for which standards and regulations are being debated well after it has been adopted by billions of users, the terms of engagement for innovations such as Libra must be adopted in advance.”
Now, the Bank’s quarterly report has firmed that tone further. The FPC statement read:
“The terms of engagement for innovations such as Libra must be adopted in advance of any launch. UK authorities should use their powers accordingly.”
Particular mention was made of the security issues regularly faced by digital currencies. Digital wallets holding cryptocurrencies are regularly hacked and the BoE believes that wallet providers should be treated in the same way as banks and subject to requirements such as deposit insurance, liquidity and capital requirements.
“The resilience of the proposed Libra system would rely on the stability of not just the core elements of the Libra Association and Libra Reserve but also the associated critical activities conducted by other firms in the Libra ecosystem, such as validators, exchanges or wallet providers.”
The EU is also taking a strict line with Libra, yesterday stating that it would propose a new law to cover crypto-asset projects, saying that they posed a risk to the wider financial system.
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