European central bankers claim oversight over Facebook’s cryptocurrency

FRANKFURT: Three European central bankers are claiming oversight over Facebook’s planned virtual currency to ensure it will not jeopardise the financial system or be used to launder money.

Facebook drew worldwide interest this week when it announced plans to introduce a cryptocurrency called Libra, part of an effort to expand into digital payments.

Facebook said Libra would be backed by real-world assets, including bank deposits and short-term government securities, to make it more stable – and thus practical for payments and money transfers – than other cryptocurrencies such as bitcoin.

With the potential to reach billions of internet users and the backing of payment giants like Visa, Facebook hopes Libra will not only power transactions but offer people without bank accounts access to financial services for the first time.

But the central bankers of Britain, France and Germany said Facebook should expect scrutiny.

“It has to be safe, or it’s not going to happen,” Bank of England Governor Mark Carney told the BBC in an interview broadcast on Friday.

“We, the Fed, all the major global central banks and supervisors, would have direct regulatory (oversight),” he said, referring to the U.S. Federal Reserve.

Global central bankers have so far largely refrained from regulating digital currencies, having failed last year to reach an agreement on how to do so and concluding they were too small to pose a risk to the financial system.

Other global regulators have been monitoring the growth of cryptocurrencies. The Financial Action Task Force, a Paris-based global anti-money-laundering watchdog, is expected to announce rules to address the use of digital coins for illegal purposes.

But Libra’s announcement has put the issue back on their radar, with the focus now shifting from bitcoin to so-called stablecoins, such as Facebook’s Libra, that are backed by real-world assets.