Yesterday saw the announcement that the Libra Association is seeking to apply for a license, to register Facebook’s forthcoming Libra as a payments system in Switzerland. Today, the head of Switzerland’s financial watchdog has spoken out, commenting on the perceived pressure for the country accepting the cryptocurrency, as well as its potential use cases.
Swiss watchdog chief speaks out about Facebook Libra
During an interview with Neue Zuercher Zeitung, a Swiss publication, Mark Branson, the director of the Financial Market Authority stated that despite Libra being viewed controversially worldwide, it’s not his agency’s role to “facilitate” the initiative.
“We have to explain and apply the existing rules.”
However, Branson also stated that if the nation seeks to become a major financial hub, it needs to consider the potential risks of projects such as Libra.
“High finance can bring reputational risks. This is true everywhere in the world. But I have a hard time thinking that Switzerland should become a second-rate financial centre just to avoid such risks. The decisive factor is whether Switzerland has credible regulation and supervision as well as appropriate framework conditions for large players.”
Regulators around the globe have cited concerns pertaining to the financial risks of Facebook’s project. Branson, however, stated that FINMA isn’t under pressure to implement rigid rules to Libra.
“Libra has big ambitions. We did not need foreign pressure to recognize this.”
He also cited the fact that Libra’s 28 founding members include “successful and huge corporations.”
As reported by TSA, U.S. lawmakers have been travelling to Switzerland to conduct discussions around Libra and it’s possible regulation.
Maxine Waters, a notable Libra critic, head of the House Financial Services Committee, recently stated that she still holds doubts about Libra even after talks with Swiss watchdogs. Waters stated that she had concerns over “allowing a large tech company to create a privately controlled, alternative global currency.” She also stated that the talks with the Swiss regulators were “helpful in understanding the status, complexity and magnitude of Facebook’s plans.”
Branson, in the interview, stated that an international project such as Libra can only be approached via the coordination of international regulatory bodies. He further cited that it would be “illusory” to think that only one nation could carry the burden.
Branson also addressed the concerns that Libra and other cryptocurrencies could form an avenue for money launderers, and accepted that the technology poses a “challenge”. Moreover, he stated that FINMA has intentions of regulating the crypto industry similarly to the way it regulates traditional finance.
Branson did however also stated that while cryptocurrencies do pose certain risks, they also come with potential “benefits” and could in fact help combat money laundering.
“For example, if traceability of transactions becomes fully available. So there are risks and opportunities.”
Libra has risks and potential opportunities
In light of yesterday’s news that the Libra Association is seeking an assessment from FINMA in preparation to register as a payments system in Switzerland, Neue Zuercher Zeitung questioned Branson as to whether the license would be enough to address Facebook Libra’s hefty ambitions.
Branson stated that the license is required, however, if Libra does provide other “risk-enhancing services” FINMA would place additional requirements. Branson cited Libra’s reserve, which will include several fiat currencies and government bonds. Of course, this would posse risks over and above that of payments, which “would have to be met with corresponding requirements, according to the principle of ‘same risks, same rules’.”
The Libra Association also addressed the concerns around money laundering in a statement to the press on Wednesday:
“The Libra Association will maintain AML guidelines, which its members will be expected to comply with if they choose to provide financial services on the Libra network. 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.”