Facebook is facing growing scrutiny from regulators over its bold currency plans. Photo/Getty Images
Facebook is facing growing scrutiny from regulators over its bold currency plans. Photo/Getty Images
Facebook's hopes of launching a new virtual currency have suffered another blow, as two more financial regulators said on Tuesday they are paying close attention to the social media company's plans.
Both the international Financial Stability Board and the UK's Financial Conduct Authority have said they will not allow theworld's largest social network to launch its planned digital currency without close scrutiny.
Facebook is hoping to upend the global payments market with its new currency, called Libra, which the company promises will be instantaneous and almost free. The company is working with other internet and payments groups, including Uber, Lyft, Visa and Mastercard, each of which has pledged to invest $10m in the project.
Executives were hoping the company would be able to operate without the kind of strict international regulation encountered by banks and other payments companies. But the FSB and the FCA have now joined the Bank of England and the G7 in warning that might not be the case.
In a letter to G20 leaders ahead of their summit in Osaka, Japan this weekend, Randal Quarles, the head of the FSB and vice-chairman of the Federal Reserve in charge of banking oversight, warned of the potential risks posed by digital currencies that become widely used.
"Though cryptoassets do not currently pose a risk to global financial stability, gaps may occur where cryptoassets fall outside the scope of regulators' authority or from the absence of international standards," Mr Quarles said in the letter on Tuesday. "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 added: "The FSB and standard setting bodies will monitor risks very closely and in a co-ordinated fashion, and consider additional multilateral responses as needed." A senior FSB official said: "If we're to have something like Libra, if it were to become a widespread retail payment mechanism . . . we would obviously be looking at that very closely."
At the same time, Andrew Bailey, the head of the FCA, confirmed his organisation is working with the UK Treasury and the Bank of England to scrutinise Facebook's plans. "We will have to engage domestically and internationally, with Facebook and this other [Libra] organisation. They are not going to walk through authorisation without that," Mr Bailey told the Treasury select committee on Tuesday.
Facebook CEO Mark Zuckerberg is fighting on many fronts. Photo/Getty Images
Their warnings come less than a week after Mark Carney, the governor of the Bank of England, said that if Libra was successful in attracting users, "it would instantly become systemic and will have to be subject to the highest standards of regulation".
Olivier Guersent, the EU official in charge of financial stability, said ahead of Libra's unveiling that Facebook's potential concentration of both personal and financial data needed attention from regulators.
Mr Quarles was speaking in his role as chair of the FSB, but his comments are also the first time since Facebook's announcement that a senior US regulator has talked about how they might approach Libra.
