Bank of England welcomes Facebook’s Libra with ‘open mind, not open door’

By Roger Baird on 21st June 2019

Fintech

The Bank's governor Mark Carney added tech firms and non-banks would be allowed to cheaply store funds in its vaults overnight.

Bank of England welcomes Facebook’s Libra with ‘open mind, not open door’
Image source: Commons Wikimedia

Bank of England governor Mark Carney offered a cautious welcome to Facebook’s plans for a new global currency, saying it “approaches Libra with an open mind but not an open door”.

He said tech firms and non-banks will be allowed to store funds overnight in interest-bearing accounts at the central bank, giving them the same privileges as high street banks.

This could increase competition, lower costs and boost financial inclusion for consumers and businesses, said the governor at his annual Mansion House speech in the City last night.

But he stressed that Facebook’s Libra and other digital payment providers - such as Square and Worldpay - needed to be brought under the wing of global regulators.

Carney said: “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.”

 

Lower costs

The governor’s speech comes two days after Libra’s backers led by Facebook said they planned to introduce a new digital currency. The tech giant said that Libra, unlike other cryptocurrencies such as Bitcoin, will be backed by a basket of reserve currencies like Sterling and the US dollar in a bid to curtail wild fluctuations.

Facebook said the currency will dramatically lower the costs of domestic and cross border payments, in a move it hopes will upend the delivery of financial services around the world.

However, policymakers have raised concerns ranging from money-laundering, tax evasion and data protection issues.

Carney said Libra said must “meet the highest standards of prudential regulation and consumer protection”, adding that it should also be “a pro-competitive, open platform that new users can join on equal terms”.

 

Levels of Trust

However, the governor stressed that the central bank was determined to continue its support of the digital economy.

He said: “The Bank’s strategy to open access to a wide range of payment solutions combined with appropriate regulatory oversight of them maximises the likelihood that the payments revolution will meet the demands of the new economy and the needs of all our citizens.”

The governor’s speech was welcomed by UK fintech lobby group Innovate Finance.

The body’s chief executive Charlotte Crosswell said: “Opening access to new types of payment providers shows a real coming of age moment for fintech, taking it to a new level of trust and acceptance.”

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