In Libra-land, the speed bumps, hurdles and possibly even roadblocks continue to spring up. In reference to the regulatory climate, don’t expect it to ease anytime soon. Cryptocurrencies, Facebook’s Libra included, face at least some new headwinds as they target a mainstream embrace.
In remarks to reporters this past week in Geneva, Switzerland, US Treasury official Sigal Mandelker, who serves as undersecretary of the Treasury for Terrorism and Financial Intelligence, said cryptocurrencies that operate anywhere in the United States will have to comply with regulations that target fraud.
“Whether it’s bitcoin, Ethereum, Libra, our message is the same to all of these companies: anti-money laundering and combating the financing of terrorism has to be built into your design from the get-go,” she said. The official said she was planning to meet with the Swiss financial regulator, FINMA, this week, in discussions that—according to Coindesk—would focus on anti-money laundering (AML) efforts.
As she told reporters, digital asset companies have spent relatively more time on technology and infrastructure, and there has not been enough focus on AML efforts.
Switzerland may be a focal point for Libra, as in past months the data protection authority there has said that Facebook had not responded to requests for details on how Libra would have features that would battle such fraud.
Switzerland may also offer a litmus test in just how the digital currency may be classified on a go-forward basis — which would, of course, have ripple effects for other offerings from other companies, across all types of cryptos and stablecoins.
On Wednesday, September 11, news broke that the association behind Libra, known as the Libra Project, had applied for a payments license in the country. The request asks how the coin might be classified and regulated under that country’s rules.
The association also said, per a release, that “the choice of Switzerland as the home for the newly established Libra Association, which when fully developed will have a diverse group of member organizations spanning technology, financial services, social impact organizations and venture capital, among others, harnesses Switzerland’s role as a nucleus for international organizations.”
FINMA, for its part, has said, “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.” Conditions for such a payment system license being granted seem to already exist — among them a setup where “returns and risks” tied to the stablecoins would be carried by the association and not by coin holders. Granting a license would be contingent on managing those risks, according to reports.
One voice from the sidelines less than enthused by Libra’s promise: Twitter CEO Jack Dorsey. He has said, according to Forbes, that his company will not support Libra, and that “open internet standards serve every person better than ones controlled or started by companies,” which seems a bit of criticism of the private efforts of the consortium.
The road to Libra’s ostensible 2020 debut is fraught. It should be noted here, too, that the social media giant has tried to make the leap into financial services before. You might not remember Facebook Credits, where transactions for things like applications were done across the platform using, well, credits. And the Messenger Payments peer-to-peer payment offering has yet to take off. Third time’s a charm? Perhaps, but perhaps not. The jury is still out over the model of collecting fees on Libra transactions (the association itself will create and issue Libra), and Facebook has already telegraphed its ability to, eventually, issue credit (hence, we assume, the eyeing of banking licenses).
But in the end, with the growing opposition from critics over data, privacy and the idea of a centralized currency managed by commerce and social media giants — might the disruptor be disrupted?
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