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By Jason Douglas
LONDON--Facebook Inc.'s (FB) Libra project should be carefully vetted by regulators, Bank of England Governor Mark Carney is due to say Thursday, offering an early insight into how the U.K. central bank will approach the new cryptocurrency.
In an annual address to bankers in London's financial district, Mr. Carney is expected to say Libra has the potential to be a critical part of the global financial system given the social media giant's reach and as such will need to be scrutinized by regulators and central banks.
"Libra, if it achieves its ambitions, would be systemically important," Mr. Carney will say, according to a text of his remarks published in advance by the BOE.
Facebook this week said that Libra, a secure blockchain-based payment system backed by hard assets, would be designed for ordinary users, making it among the boldest efforts yet to bring digital currencies into the mainstream.
Facebook named a series of corporate partners--including financial-services heavyweights Mastercard Inc. (MA) and PayPal Holdings Inc. (PYPL), and tech giants Uber Technologies Inc. (UBER) and Spotify Technology SA (SPOT)--that it said would help create what it described as a "secure, scalable and reliable" cryptocurrency.
The Wall Street Journal reported in May that the initiative involved developing a "stablecoin"--a digital asset backed by a basket of global currencies or other investments--unlike other cryptocurrencies, such as bitcoin, whose values can fluctuate sharply.
Facebook and its partners will need to satisfy regulators on issues ranging from antimoney laundering to data protection, and central banks will need to consider the implications of Libra for financial and monetary stability, Mr. Carney is expected to say.
All this must happen before the payment system's formal launch, he will say.
"Unlike social media, for which standards and regulations are being debated well after it has been adopted by billions of users, the terms of engagement for innovations such as Libra must be adopted in advance of any launch," Mr. Carney will say.
Still, he will say the BOE will approach Libra "with an open mind," acknowledging it may extend access to financial services and lower the cost of cross-border payments.
Libra is just one of a host of innovative payment systems that are upending traditional banking. In many parts of Europe, cash use is shrinking rapidly as consumers use electronic alternatives and smartphone apps to pay for goods and transfer money.
The BOE plans to launch a public consultation on whether to permit nonbank payment providers to hold accounts at the central bank like commercial banks, giving them access to central-bank reserves in times of financial stress, Mr. Carney is due to say. Such a change would bring down costs for consumers and aid financial stability, he will argue.
Mr. Carney is also expected to say that banks in the U.K. will be tested in 2021 for their resilience to financial risks arising from climate change, a first for a major central bank.
Write to Jason Douglas at Jason.Douglas@wsj.com
(END) Dow Jones Newswires
June 20, 2019 12:38 ET (16:38 GMT)
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