Facebook will not 'walk through' regulatory checks on Libra, warns UK watchdog

Matthew Field
Andrew Bailey told MPs the FCA was engaging with Libra - Bloomberg

Britain’s financial watchdog has warned that Facebook’s plans for its Libra cryptocurrency will not simply “walk through authorisation” and must be scrutinised.

Andrew Bailey, chief executive of the Financial Conduct Authority (FCA), warned that Facebook's digital currency, which it plans to launch next year to provide digital trades and payments to potentially billions of users, had the potential to be “extremely significant” and raised “very big issues for the public policy world”.

Facebook announced its digital currency, called Libra, last week, as well as an app for consumers that will let people trade its Libra digital currency, making payments and sending money overseas.

But the plans have been met with immediate regulatory pressure in Europe and the US as policymakers grapple with the technology giants plans.

Mr Bailey told the Treasury Select Committee the FCA had been talking to Facebook about its plans, along with the Bank of England and the Treasury itself.

“We will have to engage domestically and internationally with Facebook and this organisation [the Libra Association] that has been set up,” Mr Bailey said, “because they are not going to walk through authorisation without that at all.”

He did not explain what financial rules Facebook would need to follow for its digital coin, although the company is likely to be expected to ensure compliance with certain anti money-laundering rules and payments regulations.

The FCA chief executive said he felt Facebook had been “quite transparent” about its plans, although there was still not enough detail on what the business model of its cryptocurrency arm was.

Facebook plans to launch a new business, Calibra, which will run its cryptocurrency app through which consumers will be able to make payments. It will also be part of the Libra Association, a 28 member group based in Switzerland that will control and develop its digital currency.

Cryptocurrencies still largely exist in a legal grey area for regulators. Last week, Treasury Committee chair Nicky Morgan warned the rules in the UK were still “not fit for purpose”.

Bank of England governor Mark Carney said he would great the new Facebook coin with “an open mind not an open door”. Leaders from the world's largest central banks are preparing to set up a group to look at the impact of such a digital coin on global markets, while Facebook's head of cryptocurrencies is set to be hauled in front of US politicians next month.