Banks might have to cut ties with Facebook if the social media giant launches its Libra digital currency without fully addressing financial regulators’ money laundering fears, the chief executive of ING has warned.
Ralph Hamers told the Financial Times that institutions like his had a role as “gatekeeper to the financial system” that would make it difficult for them to bank a company if there were suspicions their activities were “opening up [the system] for financial . . . crime”.
“Then we can take measures and exit the client, or not accept the client, so those are discussions you would have to have,” he added. Asked directly if that meant launching Libra could make it harder to bank the project’s creator Facebook, he replied: “Yes, that’s what I think.”
A Facebook spokesperson said: “From the beginning, we’ve said we’re committed to taking the time to get this right …As a member of the Libra Association, we will continue to be a part of this dialogue to ensure that this global financial infrastructure is governed in a way that is reflective of the people it serves. Facebook will not offer Libra through its Calibra wallet until the Association has fully addressed regulators’ concerns and received appropriate approvals.”
Money laundering is high on the list of global regulators’ concerns about Libra, since the proposed cryptocurrency could allow criminals to move money across national borders quickly without oversight.
Banks are steering clear of the project until there is more clarity on how it will allay those concerns. Mounting regulatory and political scrutiny over the project prompted the recent exodus of five of Libra’s initial 28 backers, including payments giants Visa, Mastercard and Stripe.
“We are such a large, regulated institution that you don’t want to risk anything,” Mr Hamers said of his bank’s decision not to engage with a project that believes it can improve financial inclusion for two billion unbanked and underbanked people worldwide. “We’ve said we’ll take a look and see how this develops.”
Other bankers have been blunter about Libra’s prospects. At the Institute of International Finance’s annual meeting in Washington last week, Jamie Dimon, JPMorgan Chase chief executive, described Libra as “a neat idea that will never happen”.
Last week, Lael Brainard, a Federal Reserve governor, said Facebook would have to make commitments on money laundering, consumer protection and privacy before it launched the currency in the US.
Facebook chief executive Mark Zuckerberg is expected to address these and other issues when he testifies before Congress next week.
Despite his reservations, Mr Hamers, whose bank has won accolades for its tech-forward approach, described Libra as a “good initiative to learn with”. He added that he would “rather have regulators engage in these kind of discussions and see how you can take it forward . . . rather than shut the door”.