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The Bank of England has called for “highest standards of resilience” and “appropriate supervisory oversight” for Facebook’s Libra cryptocurrency project before it launches in the UK.
The central bank’s Financial Policy Committee this week published the October Financial Policy and Summary. The committee said:
“Libra had the potential to become a systemically important payment system. The FPC judged that such a system would need to meet the highest standards of resilience and be subject to appropriate supervisory oversight…The terms of engagement for innovations such as Libra must be adopted in advance of any launch. UK authorities should use their powers accordingly.”
The FPC further stressed on the crucial role played by the Libra Association, Libra Reserve, and the firms that have expressed their intent to join this ecosystem, saying:
“The resilience of the proposed Libra system would rely on the stability of not just the core elements of the Libra Association and Libra Reserve but also the associated critical activities conducted by other firms in the Libra ecosystem such as validators, exchanges or wallet providers. This emphasised the need to ensure end-to-end resilience.”
The committee has laid out three key principles to ensure that the innovations in payment activities, such as Libra, support financial stability. These principles are that regulation and supervision should:
- “Reflect the financial stability risk, rather than the legal form, of payments activities;
- Ensure end-to-end operational and financial resilience across payment chains that are critical for the smooth functioning of the economy; and
- Ensure that sufficient information is available to monitor payments activities so that emerging risks to financial stability can be identified and addressed appropriately.”
Meanwhile, U.S. lawmakers have reportedly started to build pressure on the member firms of the Libra Association to reconsider their involvement, threatening them with increased oversight in their non-blockchain businesses. PayPal has already withdrawn its participation from the project.
Facebook CEO Mark Zuckerberg is going to testify on the Libra project before the House Financial Services Committee on October 23.
