Facebook’s crypto faces pre-G20 examination

Updated June 27, 2019

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Facebook promises the new currency, launching next year, will slash transaction costs and bring more services to people without access to the banking system. — AFP/File
Facebook promises the new currency, launching next year, will slash transaction costs and bring more services to people without access to the banking system. — AFP/File

LONDON: Heading in to the G20 summit, Facebook is on notice from powerful regulators including the Fed chief that its plans for a global cryptocurrency face piercing scrutiny.

The Libra coin is endorsed by a heavyweight consortium of companies, and could see Facebook leverage its two billion-plus users to bring virtual money out of the shadows and into the mainstream.

But Federal Reserve chairman Jerome Powell, addressing the launch for the first time on Tuesday, added his considerable voice to warnings heard already from regulators in Europe and from US lawmakers.

“We’re looking at it very carefully,” Powell told an event sponsored by the Council on Foreign Relations in Washington.

“Given the possible scale of it, I think that our expectations from a consumer protection standpoint, from a regulatory standpoint, are going to be very, very high,” he said.

Facebook promises the new currency, launching next year, will slash transaction costs and bring more services to people without access to the banking system.

But for regulators, Libra is potentially a loose cannon in the armoury of international finance, and Powell was not alone this week in starting to erect his defences as the G20 leaders prepare to meet in Japan this weekend.

Randal Quarles, chairman of the international Financial Stability Board and a deputy to Powell at the Fed, presented a report to the G20 leaders highlighting the risk of crypto-assets being exploited for money-laundering and financing of terrorism.

“Though crypto-assets do not currently pose a risk to global financial stability, gaps may occur where crypto-assets fall outside the scope of regulators’ authority or from the absence of international standards,” he wrote in a letter to the leaders.

Published in Dawn, June 27th, 2019