Facebook’s digital currency Libra must meet stringent standards if its it to become a significant part of the payments landscape, according to the Bank of England (BoE).

In a hardening of its stance on Facebook’s plans to launch the digital payments system, along with the Calibra digital wallet, across its messaging platforms, the Financial Policy Committee (FPC) said the system has the potential to “become a systemically important payment system” and would need to ensure it meets the highest regulatory standards in advance of a roll-out, currently planned for 2020.

In its latest financial policy report, the FPC noted that prudential regulation and supervision should adjust to fast-moving developments in payments activities, which are currently a focal point for innovation in financial services. Such measures could include stress-testing required of traditional payments firms.

It stated: “Libra has the potential to become a systemically important payment system. The FPC judges that such a system would need to meet the highest standards of resilience and be subject to appropriate supervisory oversight.

“The terms of engagement for innovations such as Libra must be adopted in advance of any launch. UK authorities should use their powers accordingly,” the report summary added.

The social media giant has attempted to reassure authorites by explaining the digital payment technology would be overseen by the Libra Association’s independent board - featuring what was 28 technology and payments firms - to ensure a stable roll-out and maintain high security standards.

However, last week payments giant PayPal become the first company to drop out, as the project receives increased regulatory scrutiny.

According to the FPC report, the key principles guiding regulators’ approach to regulation and supervision of payments innovation such as the Libra project should reflect the financial stability risk, rather than the legal form, of payments activities. They should also ensure that sufficient information is available to monitor payments activities so that emerging risks can be identified and addressed appropriately, and make sure that sufficient information is available to monitor payments activities so that emerging risks to financial stability can be identified and addressed appropriately.

Dante Disparte, head of policy and communications for the Libra Association, said: “We have seen the Bank of England’s report and welcome its recommendations. We recognize that blockchain is an emerging technology, and that policymakers must carefully consider how its applications fit into their financial system policies.

"The Libra Association and its members are committed to working with applicable regulatory authorities to achieve a safe, transparent, and consumer-friendly implementation of the Libra project.”

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