Facebook Libra, like other digital currencies, must comply with rules: Bank of Japan

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The deputy governor of the Bank of Japan has said digital currency operators must comply with regulations around money laundering and risk management before they can launch, in comments aimed primarily at Facebook’s Libra stablecoin.

Central banker Masayoshi Amamiya made the remarks at an event last week, in which he said platforms like Facebook would be expected to meet the same compliance requirements as other digital currency operators before being allowed to trade, Reuters reported.

At an event hosted by Reuters, Amamiya said it was incumbent on operators to act responsibly to deliver safe, secure payment settlements.

Speaking about Libra specifically, he said it was important to bear in mind “the potential global user-base could be enormous.” Yet he warned central banks must be vigilant to the impacts of a launch like Libra on the wider financial and payment ecosystems.

It comes after Facebook said in October that Libra could launch in the first half of 2020, despite ongoing issues with regulators and central banks worldwide.

Facebook has said the project will launch in global markets after individual compliance is reached on a state-by-state basis, a position that has the Libra team engaged with multiple different regulators and central banks in advance of its rollout.

Several European jurisdictions in particular have sounded warning shots, including France where senior government ministers have publicly said they intend to take a hard line on the Libra proposals.

The comments from the Bank of Japan deputy governor add further weight to the international burden of compliance Facebook can expect if it is to launch the project as intended in 2020. While primarily aimed at Facebook, Amamiya’s comments apply equally to other platforms launching cryptocurrencies or facilitating digital payments, with the expectation of full compliance with existing regulations around payments.

On whether the Bank of Japan intends to issue a cryptocurrency of its own, Amamiya said there were no immediate plans, citing concerns over the impact of a central bank digital currency on the existing commercial banking sector.

If central bank digital currencies replace private deposits, that could erode commercial banks’ credit channels and have a negative impact on the economy.