Macaskill on markets: The coming proxy war with Facebook
The Bank of England and Federal Reserve begin to build the bulwarks against Facebook's cryptocurrency Libra.
US president Ronald Reagan joked that the nine most terrifying words in the English language are: “I’m from the government and I’m here to help.”
Bankers often complain about the burdens of regulation, but they will rely heavily on support from government officials as they seek to prevent Facebook’s digital currency Libra from bypassing financial market incumbents.
The early signs for banks are encouraging.
Randal Quarles, the Federal Reserve governor with chief responsibility for US supervision and chairman of the Financial Stability Board of international regulators, announced after Facebook unveiled its Libra proposal that it will come under close scrutiny.
Bank of England governor Mark Carney warned that a regulatory framework for payments by new systems such as Libra will be needed before they are allowed to operate and drew a contrast with Facebook’s core social media business, which developed with little initial supervision.
Carney added that the BoE plans consultations about allowing new payment systems to hold interest-bearing accounts at the central bank in the same way as commercial banks, which poses a theoretical threat to incumbents.
The principle that regulators and politicians will examine each step of the development of Libra has nevertheless been established.