Down to regulators to decide whether Facebook needs a banking license for Libra, UK's outgoing finance chief says

  • Libra is a blockchain digital currency proposed by the American social media giant Facebook.
  • The company claims it will ease cross-border payments and prevent exclusion to the banking system.
  • Questions have arisen over whether Facebook should be required to become a bank if the currency is launched.

Whether Facebook  needs a banking license to operate its digital currency should be decided by regulators and not lawmakers, according to Philip Hammond, Britain's outgoing finance minister.

This week Senate and House committees are due to examine Facebook's proposed Libra currency and how it might impact consumers, investors, and the U.S. financial system.

The social network's digital token is being launched as a solution for the number of people in the world currently operating without access to banking services. It is also viewed as a potential money maker for Facebook who would likely compete with the multi-billion-dollar remittance market.

President Donald Trump recently said on Twitter that Facebook would need a banking license to operate the currency. But speaking to CNBC's "Squawk Box" on Monday, U.K. Finance Minister Philip Hammond said requiring Facebook to become a bank was a decision that should not be made by lawmakers.

"That is an issue for the regulators. We have an independent regulatory system as you do and that is essentially an issue for the regulators to determine, not for politicians to determine," said Hammond.

He said the British government had made a decision to engage with the concept of Libra, saying that if properly regulated it could be "a very positive thing."

However he warned that, without proper scrutiny, Facebook's proposal could introduce "great risk" into the financial system as it could quickly be adopted as a tool for money launderers and sponsors of terrorism. He added that he viewed Libra as being different from bitcoin — the world's most popular cryptocurrency — because the two coins had contrasting ownership structures.

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