“Libra project should be carefully vetted” – BOE’s Gov. Carney

"Libra project should be carefully vetted" - BOE's Gov. Carney

Bank of England’s Governor Marc Carney is expected to say Thursday that Facebook’s Libra project needs careful scrutiny by regulators.

According to the text of remarks by Mr. Carney, published in advance by the UK central bank, Mr. Carney will say, “Libra, if it achieves its ambitions, would be systemically important.”

Facebook Tuesday announced its plans to launch Libra on the first half of 2020 as a secure, open-sourced, blockchain-based payment system that would be pegged by real underlying assets in order to stabilize the value of the cryptocurrency.

Libra is designed to be easily accessible by anyone with access to smartphone and financial transactions are expected to be as simple as sending a text from one person to another.

However, Facebook still hasn’t recovered from its crisis involving Cambridge Analytica and lawmakers are still concerned about the social media giant’s privacy and security issues.

Mr. Carney will be looking to see how Facebook will address all of its existing privacy concerns satisfactorily as well as how it will satisfy lawmakers on issues such as financial security, data protection, anti-money laundering and the implication of Libra on local currency markets.

Mr. Carney’s prepared remarks further goes to say, “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 of any launch.”

One of the key concerns he is hoping to get addressed is whether Facebook’s Libra (and other non-bank payment providers) should be allowed to hold accounts at the Central Bank, much like commercial banks. This would not only bring down consumer costs but also ensure financial stability by giving them access to central-bank reserves in times of financial stress. To this end, Bank of England is expected to initiate a public consultation.

That being said, with the use of cash aggressively shrinking throughout the world, including Europe, Mr. Carney is expected to approach Libra “with an open mind” as it very well may lower the cost of financial transactions (especially cross-border) and benefit millions of consumers.

Separately, Facebook is gearing up to face The US Senate Banking Committee on July 16th to go over its Libra plans and address any concerns lawmakers might have.