Libra Association, the non-profit organisation launched by Facebook to oversee its proposed cryptocurrency Libra, has today announced that it is pursuing a payment system licence under the Swiss Financial Market Supervisory Authority (FINMA).
Facebook announced its plans in June, unveiling a “new global currency powered by blockchain technology”, which has been designed to be borderless and backed by low-volatility assets. This will help to avoid the constant fluctuations that have stopped cryptocurrencies such as Bitcoin from achieving widespread adoption.
Libra is being targeted at the 1.7 billion people around the world without some form of bank account by offering an easy to access service that offers low-cost transfer fees anywhere in the world.
However, Dante Disparte, Libra Association’s head of policy and communications, has insisted that innovation won’t be put ahead of regulatory compliance:
“Since our vision for the Libra project was announced 3 months ago, we have maintained our commitment that technology-powered financial services innovation and strong regulatory compliance and oversight are not in competition.”
According to a statement released by Libra, it has chosen to base operations in Switzerland due to its “pathway for responsible financial services innovation harmonized with global financial norms and strong oversight” that will allow for its open-source blockchain network to become a “regulated, low-friction, high-security payment system”.
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While cryptocurrencies and related technologies are often associated with criminal activities — given their common use on dark web marketplaces — FINMA released guidance last month detailing how organisations offering blockchain payments can adhere to regulatory requirements.
Facebook Libra “would go beyond pure payment system”
FINMA confirmed that it has received a request from the Libra Association to assess Libra under Swiss supervisory law in a statement today. The non-profit has asked FINMA to confirm how it would classify the Libra project.
While FINMA confirmed that Libra will need a payment system licence in order to operate, it has also said that additional services that “increase the risks” of a payment system must comply with additional requirements.
“Due to the issuance of Libra payment tokens, the services planned by the Libra project would clearly go beyond those of a pure payment system and therefore be subject to such additional requirements” the statement confirmed.
Facebook will have to navigate a tricky regulatory landscape if it is to successfully launch its Libra cryptocurrency. However, Kerim Derhalli, CEO and founder of investment platform Invstr, previously told Verdict that while its 2020 launch target may be ambitious, regulation is unlikely to halt Facebook’s plans to dominate payments.
“There is a long, rocky road ahead before we see Libra in the hands of the mass public,” Derhalli said. “But,this is Facebook. If anyone has the resources and lobbying power to launch in 2020, it’s them.”