Facebook Applied For Payment System License In Switzerland
The Libra project released by Facebook is currently searching for a payment system license from the Swiss Financial Market Supervisory Authority, also known as FINMA. The regulatory agency of Switzerland will be analyzing Libra’s operations, liquidity and more in order to allow it to operate in the country. The information was released by Reuters on September 11.
Swiss Regulators To Investigate Libra
Facebook is the largest social media network in the world. Back in June, it announced they were working on the so-called Libra digital asset. This is the first FAANG company that is involved in a crypto-related project. However, regulators have been very worried about the effects this cryptocurrency could have on the market.
FINMA explained the project would be more comparable to a global payment system rather than to a social network. That means that the company will have to be subject to extra requirements from liquidity and capital allocations for risk to the management of reserves.
This is also close to what U.S. President Donald Trump wrote on Twitter about Libra.
On the matter, he said back in July:
“Facebook Libra’s “virtual currency” will have little standing or dependability. If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations, just like other Banks […].”
….Similarly, Facebook Libra’s “virtual currency” will have little standing or dependability. If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations, just like other Banks, both National…
— Donald J. Trump (@realDonaldTrump) July 12, 2019
Furthermore, FINMA explained that for “bank-like risks, bank-like regulatory requirements would apply.” Libra is also going to be backed by a basket of fiat currencies from different countries. Some of these currencies will be the U.S. dollar – which is expected to amount 50% of the total allocation of fiat reserves – the euro, the yen, the pound and the Singapore dollar.
As there are going to be several fiat currencies backing Libra, the virtual currency will behave like a stablecoin. Moreover, Libra will use short-term government securities and other instruments that will be held by regulated custodians.
The goal is to launch Libra in 2020. However, there will be many steps Facebook will have to make before regulators around the world feel comfortable with this virtual currency.
“The highest international anti-money laundering standards would need to be ensured throughout the entire ecosystem of the project,” explained FINMA in a recently released statement.
Although FINMA could help Facebook start operating in some countries, other jurisdictions may not be satisfied with this regulation. The G7 group has already warned that they would not allow the project to expand if regulatory issues are not addressed on time.