Mark Carney, the governor of the Bank of England, warned on Thursday that Facebook and its partners in the Libra Association must be meticulous from the very start of their cryptoasset project.
"This is not learning on the job stuff," the chief UK central banker said at a press conference on Thursday. "It's got to be rock solid from the start or it's not going to start."
Carney warned that Libra could become a threat to financial stabilty - a label that he, and many other central bankers, have never before assigned to cryptocurrencies because of their relative obscurity as a means of exchange.
"It's either successful or it isn't," he said in the press conference following the launch of the Bank's financial stability report. He added:
If it’s successful it becomes systemic, because it would involve a very large number of users. If you’re a systemic payment system you have to be on all the time, you can’t have teething issues, you can’t have people losing money out of their wallets.
Scrupulous Asset Management
Carney also warned of the importance of managing the assets that will back the Libra cryptocurrency to ensure it maintains stability. He said:
There can’t be any basis risk, there can’t be any rebalancing risk, there can’t be anything that could give rise to speculation.
Facebook has said that Libra will be fully collateralized by a basket of highly-liquid assets including several fiat currencies and cash-equivalent assets such as high-grade government bonds.
Recognising Potential Benefits
Of the world's central bankers Carney has been one of the less suspicious of Libra, saying it could be a substantial benefit for financial inclusion and cross border payments.
And again, on Thursday the Bank governor recognised Libra's potential benefits and said regulators recognised it was "trying to solve issues that exist in the system".
It’s way too expensive to do domestic payments, it’s way too slow and that hurts consumers and businesses, it’s far too expensive to send money cross-border, and there are huge financial inclusive issues related to that. While we’re trying to address all these issues, we have to acknowledge the issues that it is trying to solve. If nothing else, this serves the purpose of raising the bar of expectations about what our citizens deserve.
Le Maire Remains Steadfast
There was no such recognition from French finance minister Bruno Le Maire, however, who on Thursday reiterated his warning against Libra competing with sovereign currencies.
In a speech in the French senate, Le Maire said:
My determination to make sure that Libra does not become a sovereign currency that could compete with the currency of states is absolute. I will never accept that corporations could become private states.
Le Maire was underlining comments made last month a few days after Facebook announced its aim to launch the Libra cryptocurrency in 2020.