“Historically, this may have been a sector that has lived by the mantra of ‘move fast and break things,’ but the issues raised here require deep thought and detail,” Chris Woolard, the Financial Conduct Authority (FCA)’s executive director of strategy and competition, said in a speech on Tuesday.
Woolard was referencing Facebook’s famous early motto, which typified the spirit of disruption in Silicon Valley during the first half of the decade. Regulators around the world have publicly expressed concern this attitude could cause problems when applied to financial services.
Separately on Wednesday, US Congress members wrote to Facebook demanding an immediate halt to development of Libra until Congress and regulators could get a handle on the project.
“When it comes to other people’s money, or safeguarding against terrorist financing, corner cutting is simply not an option,” Woolard said in a speech at the Cambridge Judge Business School.
“For those who think the model is to try it in beta for a few million people and see what happens, there may be activities here that are illegal without authorisation in many countries, not just the UK.”
Woolard’s warning comes in the wake of Facebook announcing Libra, a new cryptocurrency project, two weeks ago.
Libra is due to launch next year and will be backed by a basket of stable assets to reduce price volatility. Facebook and its partners — who include Visa (V), MasterCard (MA), PayPal (PYPL), and eBay (EBAY) — hope the cryptocurrency will help the 1.7 billion people around the world without bank accounts to access financial services.
“Libra could be very significant indeed,” Woolard said.
“It will pose questions for us as a regulator. It will pose questions for our colleagues at the Bank of England. It will pose questions for us working with our international partners. Moreover, its size and scale will pose questions for society and government more generally about what is acceptable and desirable in this space.”
Woolard said the FCA has held discussions with Facebook about the project, as have other regulators and central banks around the world.
Libra has so far received a mostly frosty reception from decision makers globally. The G7 nations launched a joint inquiry into the risks of new cryptocurrencies like Libra and France’s finance minister, Bruno Le Maire, said Libra “can not and must not” become a “sovereign currency.”
In the US, Rep. Maxine Waters, who is chair of the House of Representatives’ financial services committee, called for an immediate pause to Facebook’s development efforts “until Congress and regulators have the opportunity to examine these issues.”
Over the weekend, Agustin Carstens, the head of the Bank for International Settlements, told the Financial Times there was “very immediate and very obvious concern” about Libra being used for money laundering.
“We need to ensure that innovation works in the interests of consumers,” Woolard said on Tuesday. “To do that, we need to thoroughly understand the business models firms are suggesting and how they benefit consumers.
“We need to consider whether consumers understand and actively consent to the trade-offs inherent in those business models. And we need to consider the wider impact on market integrity and stability.”
Oscar Williams-Grut covers banking, fintech, and finance for Yahoo Finance UK. Follow him on Twitter at @OscarWGrut.