Facebook previously created a non-profit membership organization that runs the Libra cryptocurrency project. Now this team wants to apply for a payment system license in Switzerland.
This information was confirmed by the Swiss financial regulator FINMA in a guidance note on stablecoins. The note published on Wednesday confirms they received a request for an assessment on how the Libra project would be classified in its current state. FINMA’s answer was quite clear, stating that, as currently planned, Libra “would require a payment system licence from FINMA,” and:
“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, FINMA said, noting this mean it would be subject to such additional requirements.”
This answer continues the trend started by other global regulators who are concerned that the launch of Libra will increase the risk of money laundering, because the cryptocurrency will be available to billions of Facebook users worldwide. For example, Sigal Mandelker, U.S. Treasury official, stated that Libra has to meet all standards of regulatory compliance before any kind of launching step.
All Swiss payment systems are subject to the Anti-Money Laundering Act. In this line of thought FINMA added:
“Under the FMIA, all additional services that increase the risks of a payment system must be subject to corresponding additional requirements. This means that all the potential risks of a Swiss payment system, including bank-like risks, can be addressed by imposing appropriate requirements in line with the maxim ‘same risks, same rules’.”
As for the requirements, FINMA said that they “would relate in particular to capital allocation (for credit, market and operational risks), risk concentration and liquidity as well as the management of the Libra reserve.”
What are the conditions?
As stated, one of the conditions would be that all “returns and risks” that are connected with the management of the reserve “were borne entirely by the Libra Association and not – as in the case of a fund provider – by the ‘stable coin’ holders.”
As Libra is outlined as a global project it will most certainly need coordination from regulators from all around the world, in regards to the risk of money laundering, governance and managing the reserve.
A report from Tuesday stated that the Global money-laundering watchdog, Financial Action Task Force (FATF) is looking closely into Libra. FATF president Xiangmin Liu commented:
“We want to make sure that if there are significant risks, they need to be addressed,”
In the meantime, the Libra Association shared their stance:
“The Libra Association will maintain AML guidelines, which its members will be expected to comply with if they choose to provide financial services on the Libra network. The association will set standards for its members to maintain AML and anti-fraud programs, and to cooperate with legitimate law enforcement investigations. It will be the responsibility of developers building on the Libra Blockchain to comply with the laws and regulations in the jurisdictions in which they operate.”