Facebook is already under fire from regulators less than a day after officially revealing its cryptocurrency whitepaper. Based on three separate talks, it’s clear top government and bank officials from around the world are preparing to regulate Facebook Libra.
Cryptocurrencies like bitcoin transcend national borders, and project Libra is looking to cash in on this edge that no other central bank can lay claim to. Regulators are on high alert as Facebook ambitiously aims to be the first global central bank.
Bank of England Governor Demands High Standards
In Portugal at the ECB’s annual symposium, Bank of England Governor Mark Carney earlier today called on G7 countries to heavily scrutinize the Libra launch. He is cited in Bloomberg as saying:
“Anything that works in this world will become instantly systemic and will have to be subject to the highest standards of regulation. We will look at it very closely and in a coordinated fashion at the level of the G-7, the BIS, the FSB and the IMF. So open mind, but not open door.”
Last year, the governor openly dismissed cryptocurrency but appears to be coming round now as project Libra finally moves forward.
Former FDIC Chair Punts the Idea of a ‘FedCoin’
In an interview with CNBC, Sheila Bair, former chair for the Federal Deposit Insurance Corporation (FDIC), raised some concerns about the Libra launch, saying:
“What are they doing with the money, if I give them some dollars to buy the Libra, they’re kinda being fuzzy about that in their whitepaper…The strength of the collateral is a question I would have about it.”
Facebook has 2.6 billion users worldwide. Those users exchange value in over 100 different currencies. Despite Libra’s claim as a future stablecoin, it’s unclear yet how Facebook will manage investment with its foreign reserves.
Bair later reiterated her idea of a Fed-backed cryptocurrency, however, nothing has come of it. Governments are usually slow with the uptake of new technology, but Libra may change all of that if it succeeds.
French Finance Minister Calls for Urgent Report
French Finance Minister Bruno Le Maire voiced his concerns over Libra’s potential for currency status on Europe 1 radio, saying:
“It is out of the question that Libra becomes a sovereign currency. It can’t and it must not happen.”
Le Maire echoed Carney’s call for the Group of Seven governors – or “guardians of the global monetary system” as he put it – to report on Libra for their next meeting in July.
Can Officials Actually Regulate Facebook Libra?
Bair’s call for a federally backed coin has one major problem. As she humorously notes further in her interview:
“[FedCoin] would give people a very safe way to make payments. I mean you don’t have to worry about the Fed defaulting right, they can print their own money.”
While the Fed can indeed print their own money, the comment highlights the conundrum that modern-day central banks face. Their jurisdiction ends at the border. Facebook’s doesn’t. At least not yet. The G7 will have to massively expand to regulate in the new digital world.
Despite the positive news, Facebook shares closed lower on the day, down 0.29%.
Image credits: Current and former global policymakers are already responding to Facebook’s Libra cryptocurrency, suggesting that it won’t be a slam dunk. | Source: REUTERS / Dado Ruvic