The Reserve Bank of Australia (RBA) along with several other central banks, have provided their initial responses to the recent announcement by Facebook (in conjunction with businesses such as MasterCard, Spotify and PayPal) of its plans to create a new blockchain based currency and payment system known as Libra.
The responses have varied in the degree of detail each central bank has been willing to disclose in their announcements with:
- RBA Governor Philip Lowe stating that “”there are a lot of regulatory issues that need to be addressed and they’ve got to make sure there’s a solid business case“.
- Chairman of the US Federal Reserve Jerome Powell and the Governor of the Bank of England Mark Carney both welcoming Libra but noting that they will need to look carefully at its application and how it may be regulated in the US and UK respectively.
- Bank of France Governor Francois Villeroy de Galhau stating that if Libra sought to operate in the country it will need to have a banking licence and will also have to comply with local anti-money laundering regulation.
The consistent theme that can be drawn from the responses above is that while central banks are not directly opposing Facebook’s initiative, given Facebook’s ambition for mass adoption and the potential risks this could pose to existing financial systems, there is no doubt that Libra will be heavily scrutinized and subject to ongoing regulation.
With a proposed launch date as early 2020 and no specific details on how it will manage multi-jurisdictional regulation, in the words of RBA Governor Philip Lowe “there is a lot of water to flow under the bridge before Facebook’s proposal becomes something we are using all the time“