Cryptocurrency receives 'open mind but not open door' welcome

The head of the UK's financial regulator the Financial Conduct Authority, known as the FCA, says that the organization has already had talks with Facebook about its plans to launch its own cryptocurrency Libra, and will have more, amid concerns that the proposal would not be scrutinized sufficiently.

More than 20 major international institutions including Visa, Mastercard, PayPal and Uber have signed up to get involved with Libra, which Facebook will unveil next week, and which it hopes could transform the international payment system.

If all goes well, it could come into circulation as early as next year, but FCA chief Andrew Bailey told a Treasury select committee that before then it would have to pass all the necessary tests.

"We will have to engage domestically and internationally, with Facebook and this other (Libra) organization. They are not going to walk through authorization without that," he said.

Facebook said the way Libra has been designed will allow users to store, spend and transfer money with almost zero transaction fees, and will be particularly targeted at people involved in cross-border remittances, a market currently worth $613 billion per year.

"Just as people can use their phones to message friends anywhere in the world today, with Libra, the same can be done with money—instantly, securely and at low cost," Facebook said.

Bank of England Governor Mark Carney and Randal Quarles, chair of international financial regulatory body the Financial Stability Board, which coordinates policy for the G20 nations, have also said the social media giant's plan to move into the world of retail payments needs to be thoroughly analyzed.

Carney said the Bank of England welcomed the proposal with "an open mind" but "not an open door". Speaking ahead of the upcoming G20 summit in Japan, Quarles said there were no plans for Libra to be discussed at the gathering, and that he did not believe cryptoassets such as Libra posed a danger to global financial stability.

However, he said he could see circumstances in which they might fall beyond the control of financial regulators.

"A wider use of new types of cryptoassets for retail payment purposes would warrant close scrutiny by authorities to ensure that they are subject to high standards of regulation," he said in a letter reported by the Reuters NewsAgency.

"The FSB and standard setting bodies will monitor risks very closely and in a coordinated fashion, and consider additional multilateral responses as needed," he added.

Olivier Guersent, the European Union's head of financial stability, has also said that the potential for an organization such as Facebook to have such a concentration of users'personal and financial data would need close regulatory attention.