In June, Facebook had
announced its plan to unveil a new global cryptocurrency powered by
the blockchain technology. The proposed currency, Libra, is set to
build an ecosystem which is devoid of bank-interventions and
naturally offers low-cost transfer fees anywhere in the world.
Libra has been designed
to be truly borderless and is backed by less volatile assets. This
will help the asset avoid constant fluctuations, which is the reason
that has stopped Bitcoin and other cryptocurrencies from achieving
widespread adoption.
According to the latest
Reuters-report, Facebook is now seeking a payment system license from
Switzerland’s financial watchdog, Financial Market Supervisory
Authority (FINMA) for its planned stablecoin project. In its official
statement by Switzerland-based Libra Association, a non-profit
organization established for governing the Libra network, the company
explained the reason behind choosing the Swiss watchdog for
coordinating its core regulatory framework. Switzerland seems to be
perfect for executing Libra’s operations due to the country’s
openness in innovative and responsible financial services coupled
with global financial norms and strong oversight. This, consequently,
would allow Libra’s open-source blockchain network to transform
into a regulated, low-friction, and highly-secured payment system.
While cryptocurrencies
and its underlying technologies have largely been associated with
criminal activities (most commonly on the dark web marketplaces), a
guidance released last month by FINMA elaborates how organizations
offering blockchain payments, like exchanges, trading platforms, and
wallet providers can secure their offerings by adhering to certain
regulatory parameters. The aforesaid guidance strongly adheres to the
digital asset regulation framework issued recently by the
intergovernmental Financial Action Task Force (FATF), which holds
provisions for Anti Money Laundering (AML) measures, Know Your
Customer compliance, risk-monitoring systems and more. FINMA has also
gone a step ahead of FATF’s provisions in refusing to exempt
payments that involve unregulated wallet providers from its
oversight.
Facebook will have to
navigate its Libra cryptocurrency through a tricky regulatory
landscape if it plans a successful launch. Libra Association has
requested FINMA to assess their cryptocurrency under Swiss
supervisory law, and also to confirm how the Swiss government body
would classify the Libra project. FINMA, on the other hand, has
reportedly confirmed that Libra will not only need a payment system
licence to begin operation, but the currency also has to comply with
additional requirements for services.
Experts believe that
there lies a long way ahead of Libra before it makes it to the hands
of the mass. On the contrary, they are also of the opinion that the
task might be daunting, but not impossible for Facebook that
necessarily has all the resources and lobbying power to launch its
cryptocurrency in 2020.
