Swiss regulator lays down law to Libra stablecoin project
The Swiss financial regulator says Facebook’s Libra cryptocurrency will need a license as a payment system as a bare minimum - but would likely have to submit to even greater supervision depending on the exact way it will function.
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When not covering fintech, cryptocurrencies, blockchain, banks and trade, swissinfo.ch's business correspondent can be found playing cricket on various grounds in Switzerland - including the frozen lake of St Moritz.
The Libra digital payment token, which plans to launch next year, would be backed by a basket of international currencies. The fund would theoretically stabilise the value of the token, preventing its price from fluctuating as wildly as other cryptocurrencies.
Defining Libra’s exact regulatory obligations is difficult given the paucity of precise technical detail on how it will work. At the very least, Libra will need a license to operate as a payment system in Switzerland, FINMA notes.
“A necessary condition for being granted a licence as a payment system would be that the returns and risks associated 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 ‘stablecoin’ holders.”
Global regulation
Such a license would subject the digital currency to stringent cyber-risk and anti-money laundering compliance rules. On Tuesday, a senior US Treasury official visiting Switzerland raised concerns that digital currencies might be used to fund terror and launder the proceeds of crime.
FINMA said that the global scope of the Libra project meant it could not be regulated only in one country. Supervision of Libra’s governance and anti-money laundering efforts requires an “internationally coordinated approach”.
The financial regulator also noted that other supervisory authorities would have to look at Libra’s tax, business competition and data protection obligations.
In a first reaction, Dante Disparte, head of policy and communications for the Libra Association, statedExternal link:
“Since our vision for the Libra project was announced three months ago, we have maintained our commitment that technology-powered financial services innovation and strong regulatory compliance and oversight are not in competition. We are engaging in constructive dialogue with FINMA and we see a feasible pathway for an open-source blockchain network to become a regulated, low-friction, high-security payment system. This is an important step in Libra project’s evolution, and we look forward to continuing our engagement with all stakeholders over the coming months.”
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Swiss central bank wary of Libra stablecoin impact
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Speaking in Basel on Thursday, SNB chairman Thomas Jordan outlined the central bank’s thinking on digital currenciesExternal link. So-called stablecoins, which hold reserves of francs, dollars and other currencies in proportion to the amount of tokens issued, are much more likely to succeed as competition to traditional forms of payment, he said. This is…
Swiss data commissioner checks up on Libra cryptocurrency
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