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Facebook's crypto project Libra would need Swiss payment system license: FINMA

Image by Christoph Scholz (Flickr)

Wed, 11 Sep 2019, 09:05 am UTC

The Swiss Financial Market Supervisory Authority (FINMA) has revealed that the Libra Association, the governing body of Facebook’s cryptocurrency project ‘Libra,’ is seeking an assessment of the crypto project under Swiss supervisory law.

FINMA made the announcement while unveiling new ‘stable coin’ guidelines. In its official announcement, the regulator said:

“The Libra Association asked FINMA for an assessment of how the supervisory authority would classify the planned Libra project including the issuance of a ‘stable coin’ under Swiss supervisory law. FINMA confirms receipt of this request.”

The regulator clarified that its treatment of ‘stable coins’ under supervisory law follows the existing approach taken to blockchain-based tokens.

“The requirements under supervisory law may differ depending on which assets (e.g. currencies, commodities, real estate or securities) the ‘stable coin’ is backed by and the legal rights of its holders…Money laundering, securities trading, banking, fund management and financial infrastructure regulation can all be of relevance,” it added.

Speaking of the Libra project, in particular, FINMA emphasized that the project should ensure compliance with “highest international anti-money laundering (AML) standards” throughout its entire ecosystem. It said that the project, in its current form, would require a payment system license on the basis of the Financial Market Infrastructure Act (FMIA).

“Under the FMIA, all additional services that increase the risks of a payment system must be subject to corresponding 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,” it said, adding that the additional requirements would relate to “capital allocation (for credit, market and operational risks), risk concentration and liquidity and the management of the Libra reserve.”

The Libra Association said that it is engaging in constructive dialogue with FINMA, adding that it sees a “feasible pathway for an open-source blockchain network to become a regulated, low-friction, high-security payment system,” Reuters reported.

Meanwhile, Facebook has revealed the initial basket of currencies that will back Libra, which includes the U.S. dollar (USD), euro (EUR), Yen (JPY), British pound (GBP), and Singapore dollar (SGD). The firm announced the list of potential in response to the concerns from U.S. Senator Mark Warner, a Virginia Democrat who sits on Senate Banking Committee, regarding the inclusion of yuan (CNY) in the basket.

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