(CN) — The governor of the Bank of England is backing Facebook’s new cryptocurrency, the Libra, saying it could unlock billions of dollars in new financing and spur development in Great Britain and beyond.
Mark Carney, a Canadian and British citizen who heads the Bank of England, endorsed Facebook’s new digital currency during a speech Thursday night delivered in the midst of Great Britain’s epic Brexit crisis.
In recent days, Facebook has been pushing its new currency with advertising across Europe in an effort to win support for its cryptocurrency. So far, European officials have been cautious about Libra, and questioned its legal basis. The currency is being developed in London.
Carney’s speech, his last as outgoing governor of the Bank of England, was given inside the gilded chambers of the Treasury in London, and followed a powerful speech by Chancellor Philip Hammond that warned against Britain crashing out of the EU without a Brexit deal.
Both speeches came on a momentous day in London and were made shortly after the Tory party finished picking two contenders to succeed Prime Minister Theresa May. Those two are Boris Johnson, a former mayor of London committed to removing Britain from the EU even without a deal, and Foreign Secretary Jeremy Hunt, who is open to continuing negotiations with the EU.
Hammond’s speech was interrupted by a Greenpeace activist who was forcefully grabbed by a Tory party member, Mark Field, who was attending the black-tie event; he escorted her forcefully out of the chamber.
Carney’s speech cast London as the future global center for a cashless financial system that will allow more people across the planet gain access to capital. He also laid out how London could be a hub for a global system of trade emerging around climate-change actions.
“The revolution of payments may not be driven by the old bank-based systems but by a new architecture,” he said. “Major changes are on the horizon, bringing enormous advantages but also more than a few new challenges.”
Carney called Libra a “stablecoin” and said it would be backed by the pound sterling, among other currencies. Carney recently held a meeting with Facebook’s Mark Zuckerberg to discuss Libra. Carney has been pressed to provide more details about their discussions, British media reported.
Facebook hopes to develop the Libra through its worldwide social media platform. It envisions people around the world gaining access to funding through Libra, which is also the astrological sign meaning balance and has as its symbol a pair of scales; it derives from the Latin word for the ancient Roman equivalent for a pound weight.
Around the world, companies and nations are developing similar forms of digital currency.
Carney said Libra “could be exchanged between users on messaging platforms and with participating retailers. As designed, Libra may substantially improve financial inclusion and dramatically lower the costs of domestic and cross border payments.”
He said “the Bank of England approaches Libra with an open mind but not an open door.” Carney said that Libra’s standards and regulations would have to be thoroughly vetted and embedded into the financial system’s checks and balances to protect consumers and investors, while also ensuring against money laundering before the Bank of England would back it entirely.
Still, he gave his full support to Libra. “Libra, if it achieves its ambitions, would be systemically important,” he said.
“Libra must also be a pro-competitive, open platform that new users can join on equal terms,” he said. “In addition, authorities will need to consider carefully the implications of Libra for monetary and financial stability. Our citizens deserve no less.”
Carney said London’s financial sector, a world leader, and the Bank of England “will help lead the way on these issues.”
“Whatever the fate of Libra, its creation underscores the imperative of transforming payments,” he said.
He added that the Bank of England’s “strategy to open access to a wide range of payment solutions combined with appropriate regulatory oversight of them maximizes the likelihood that the payments revolution will meet the demands of the new economy and the needs of all our citizens.”
He added: “Consumers and businesses increasingly expect transactions to be settled in real time, checkout to become an historical anomaly, and payments across borders to be indistinguishable from those across the street.”
Carney said an emerging financial system based around social media, artificial intelligence, big data and machine learning is radically changing the way business is conducted. He said it could be applied to Great Britain and go a long way to streamlining costs for consumers and financial institutions.
“This has the potential to yield enormous benefits for households and businesses by opening up new lines of credit, providing greater choice, better-targeted products and keener pricing,” he said.
“Already, search and social media data are supplementing traditional metrics to unlock finance for smaller enterprises whose assets are increasingly intangible,” he said.
“The City of London has maintained its preeminence by innovating,” Carney said, speaking with an American accent. He is the former governor of the Bank of Canada. He has spoken out against Britain’s leaving the EU.
“This was as true in the first Industrial Revolution, when finance oiled the pistons of the steam engines, as it is today at the dawn of the fourth Industrial Revolution, with the advent of cloud computing and the robosapien fund manager.”
He added: “Today the key competitive advantage in financial services is how firms — and supervisors — collect, store and analyze the explosion of data. Just as the steam engine transformed manufacturing, AI [artificial intelligence], ML [machine learning] and cloud-based technologies are transforming services. … Embracing these technologies could herald leaner, faster and more tailored financial services.”
Carney said the Bank of England will review how these new funding systems can be regulated and enmeshed with good banking practices.
The governor also tied the emerging financial tools to efforts to combat climate change and help transform Britain into a “carbon-neutral” nation. Britain is making a big push to be able to reduce its carbon emissions and comply with worldwide carbon reduction goals set out in the Paris Agreement.
“My final example of how the new finance can serve the new economy is the most fundamental,” he said. “Indeed, it is existential. This year, the threats from climate change spurred demonstrations across the country prompted Parliament to declare a ‘climate emergency.’”
He continued: “The changes required to achieve this are enormous.” Britain has pledged to be carbon-neutral by 2050. “Carbon emissions will have to decline by 45% from 2010 levels over the next decade. This will require a massive reallocation of capital creating unprecedented risks and opportunities.”
He said the Bank of England and London, as a global financial hub, can lead the way in helping businesses transition to a “carbon-neutral world.”
To be carbon-neutral, a company can take a number of steps to reduce its carbon footprint, such as eliminating use of fossil fuels or funding projects that offset its carbon emissions, such as planting trees.
London, he said, was leading the way by creating a green bond market, which he said has doubled every year since 2012 to reach $500 billion in funding.
“Now a range of firms at the heart of the City are beginning to reshape the management of climate-related risks and opportunities,” he said.
He said London also is developing an innovative system to audit and verify climate-related financial risks. He added that the Bank of England was committed to climate change action, including the elimination of single-use plastics and reducing its reliance on fossil fuels for electricity and business travel.
“We plan for all the electricity and gas we purchase and use across our buildings to come from 100% renewable sources, such as wind, solar and biogas by April 2020,” he said.
He said the Bank of England is launching an initiative to “stress test” the U.K. financial system’s “ability to withstand the financial risks from climate change that arise from the increased frequency of weather events and from the transition to a carbon-neutral emission economy.”
“This test will be the first of its kind to integrate climate scenarios with macroeconomic and financial models,” he said.
“The new finance has the potential to unlock stronger, more sustainable and more inclusive growth,” Carney said. “By taking the measures I outlined this evening, the Bank can enable the new economy; empower greater competition and ensure the resilience of the financial system.”
He opened his speech, titled “A New Finance for the New Economy,” by saying that the new economy is “driven by changes in technology, demographics and the environment. This new economy requires a new finance, a new finance to serve the digital economy.”
(Courthouse News reporter Cain Burdeau is based in the European Union.)