European regulators and central bankers have indicated they plan to hold Facebook and its proposed Libra cryptocurrency to “the highest standards of regulation”.
Their comments are the latest indication that, unlike other crypto-assets to date, Facebook’s plan is likely to be subjected to stringent regulatory controls.
In part that is due to its potential for instantly gaining a massive user base, due to its planned links to Facebook-owned communications tools such as WhatsApp and Facebook Messenger.
Andrew Bailey, chief executive of the UK’s Financial Conduct Authority, said on Tuesday Facebook’s Libra plans could be very significant for public policy and as such more detail would be required to give it the go-ahead.
“They are not going to walk through authorisation without that,” Bailey told Parliament’s Treasury Select Committee.
Bailey said the FCA, the Bank of England and the UK’s finance minister were working together on the Libra proposal.
The three had already had contact with Facebook and expected many more engagements, he said.
Meanwhile, Bank of France governor Francois Villeroy de Galhau said in a magazine interview that Facebook must abide by money-laundering rules and will be required to seek banking licences if it wants to offer banking services.
“If the project seeks to go beyond payments to offering banking services like deposits, it will then have to be regulated like a bank with a banking licence in all the countries it operates,” de Galhau told weekly magazine l’Obs.
During France’s presidency of the Group of Seven nations (G7) this year it is setting up a taskforce to address the security concerns posed by cryptocurrencies such as Libra on an international level, looking at issues ranging from money laundering to consumer protection.
Central banks and the International Monetary Fund are participating in the G7 working group.
Domenico Gammaldi, the Bank of Italy’s head of market and payment system oversight, also called for further information on Facebook’s plans.
“The white paper, that means ‘white,’ without any information,” Gammaldi told the Crypto Valley Conference in Zug, Reuters reported.
The officials’ comments come after the US Senate Banking Committee said last week that it would investigate the data protection implications of Libra starting next month.
At a meeting of central bankers in Portugal last week Mark Carney, governor of the Bank of England, said it Facebook began successfully attracting users “it would instantly become systemic and will have to be subject to the highest standards of regulation”.
But other central bankers said they were less concerned and that Facebook had already indicated it will “play according to the rules”.
“I think it’s an interesting development and I’m pretty relaxed about it,” Thomas Moser, an alternate member of the Swiss National Bank’s governing board, told the Crypto Valley Conference, according to Reuters.
“They have clearly indicated that they are willing to play according to the rules, they have been contacting the regulators.”
Global central bankers have until now largely held back from framing regulations for cryptocurrencies, concluding in 2018 that while volatile, they were used by too few people to pose any serious risk.
Libra may change that situation if Facebook goes ahead with plans to use it to offer inexpensive payments services to users of Facebook Messenger and WhatsApp, which have a user base of more than one billion.
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