In theory, Libra was presupposed to be managed by a Geneva-based independent association linking several companies and non-profit groups.
Swiss outgoing President and Finance Minister Ueli Maurer said on Friday that Facebook’s Libra project “failed in its current form and needs reworking to be approved.”
He said:
“I don’t think Libra has a chance in its current form, because central banks will not accept the basket of currencies underpinning it. The project, in this form, has thus failed.”
Regulators all over the world have been worried that Libra would possibly increment the risk of money laundering and criminal actions through its global cryptocurrency available to billions of Facebook users.
In September this year, United States Treasury official Sigal Mandelker stated Facebook’s Libra has to meet the highest standards of regulatory compliance prior to any launch. In the same month, Libra cryptocurrency went on to apply for licensing as a payment system in Switzerland.
Libra Will Need Extra Oversight
Swiss financial regulator FINMA then confirmed that it had received a request for an assessment of how it would classify the Libra project as currently planned. They also said back then that range of services projected by the Libra Association would need extra oversight.
FINMA 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, FINMA said, noting this mean it would be subject to such additional requirements.
FINMA then also added that a project would undergo financial market infrastructure regulation and “would require a payment system license from FINMA.”
Let’s not forget that a Swiss payment system is “automatically subject” to the Anti-Money Laundering Act. That means that “under the FMIA, all additional services that increase the risks of a payment system must be subject to corresponding additional requirements. All the potential risks of a Swiss payment system, including bank-like risks, can be addressed by imposing appropriate requirements in line with the “same risks, same rules”.
The extra conditions “would relate in particular to capital allocation, risk concentration and liquidity as well as the management of the Libra reserve”, FINMA said.
One requirement for being given a Swiss payment system license would be that the “returns and risks” related to 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.”
Libra Plans to Maintain AML Guidelines
Libra will definitely need an international strategy from regulators especially regarding the exact qualifications for administering the reserve and its governance. It will also need to discuss the money laundering risks.
From Libra they previously said they plan to maintain AML guidelines, which its members will be expected to comply with if they choose to provide financial services on the Libra network.
They said:
“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.”
The association also commented that financial involvement, legal consent and user protection are not competing goals, but more of a work in line with Libra’s focus on offering a simple global currency and financial infrastructure that helps billions of people.