Home / Archive / UK Finance Chief Ready to Engage with ‘Potentially Transformative’ Libra

UK Finance Chief Ready to Engage with ‘Potentially Transformative’ Libra

Last Updated March 4, 2021 2:38 PM
Jose Antonio Lanz
Last Updated March 4, 2021 2:38 PM

The UK is studying the properties of Libra in-depth to prevent the digital currency from damaging the economy. This is what Philip Hammond, Chancellor of the Exchequer of the United Kingdom, said in a recent interview with CNBC’s Squawk Box .

Hammond explained that regulators must fully understand how Libra works to counter the risks associated with a project of this magnitude before it happens, saying:

“It’s potentially a positive, transformative step, but it also has the potential to deliver great risk into the system.”

Libra Could Work or Fail Depending on How Well Regulated It Is

Unlike Donald Trump’s critical stance, the British government is somewhat cautious, aware of the risks but also of Libra’s potential to improve the financial system — should everything go well.

In the end, from his point of view, it will all depend on how well regulated Libra is:

“If it’s not properly regulated, it could become another channel for money launderers, terrorist financiers, and organized criminals…If it works, and it’s properly regulated, it could be transformative in operating payments systems, for example, it could be a very positive thing.”

For this reason, Hammond explains that Facebook’s new project has raised the alarms of regulatory bodies around the world. Each country in which Libra operates must establish its own bundle of regulations that the Libra Association must comply with to operate legally.

Despite being involved in numerous scandals involving private data leaks, Facebook assures Libra will be private. | Photo by JOSH EDELSON / AFP

Hammond explains that this legal issue is Libra’s main obstacle to becoming a new globally adopted currency. The modern financial system was not built overnight, and if Libra can change – for better or worse – this established order, the job may not be as easy or quick as many hope:

“We have an independent regulatory system as (The United States) do, and that’s essentially an issue for the regulators to determine, not for politicians…But it’s very important that anybody that’s operating any systemically important structure — and this could be systemically important — to be properly regulated.”

The UK Wants to ‘Engage’ With Libra

While it is difficult for regulators to reach a global consensus on Libra’s characteristics, the UK will not be the region opposing a change. Hammond explained that the jurisdiction is willing to move forward with its efforts to provide the best possible regulatory framework for Libra to become a reality:

“We’ve made the decision in the UK that we’re going to engage with this; we’re not going to turn our back on it, we are not going to stop it. We’re going to engage with it and work with others to make sure it’s properly regulated.”

Another fundamental aspect that Hammond outlined is that Libra has generated more concern among regulators than any other cryptocurrency because of the way it is conceived, noting:

“It is different because it’s owned in a different way from bitcoin.”

The U.S. Is Not So Thrilled About Facebook’s Coin

Recently a report revealed that the SEC is studying the possibility of regulating Libra as an exchange-traded fund. Should the SEC’s suspicions be confirmed, the bureaucratic arrangements for Libra to operate in the United States would be much more complicated than Zuckerberg’s team would have expected for a mere cryptocurrency.

But even this could be an optimistic scenario when compared to the “Keep Big Tech Out of Finance ” Act proposal, which, as its name implies, seeks to curb innovations of this kind to keep, by all possible means, the Federal Reserve’s power free of any kind of technological threat.