Reuters reported last week that Facebook's plan to create a convenient, frictionless, globally available cryptocurrency and payment network is facing unprecedented regulatory barriers. Although the social media company is taking steps to comply with regulators around the world, many professionals worry that this is not enough.
In the future, Facebook will work closely with central banks, financial regulators and law enforcement personnel around the world. Sean Park, founder and chief investment officer of cryptocurrency venture Anthemis, said the “straight-line” behavior of management would “involve hundreds or thousands of licenses from hundreds of regulators.”
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So far, Facebook subsidiary Calibra will develop wallet and financial services for the Facebook ecosystem. It has been registered as a money service company in FinCEN (Financial Crime Enforcement Network), applied for a transfer license in the United States, and began to apply for the New York Financial Services Agency's BitLicense.
According to reports, the company also communicated with the FCA (British Financial Market Conduct Authority), the Bank of England and the Swiss financial regulator FINMA (Swiss Financial Market Regulatory Authority).
In addition, the Russian Ministry of Finance said that Libra's position in Russia will be the same as any other digital assets, and it is expected to introduce relevant regulations. Swiss regulators have also expressed similar attitudes.
Park said that despite these measures, Facebook "will not get a free pass anywhere."
The relevant departments in Europe, the United States and India have promised to pay close attention to this social media company after launching this plan. The Bank of Singapore said it needed more information about the project, and the statement prompted the G7 member countries to reconsider how to manage their cryptocurrency working group.
Although Libra is not entirely a Facebook project, it is regulated by a corporate and non-government investment organization of the Geneva-based Libra Association, but the currency itself is facing the challenge of life and death.
It is expected that BIS (BIS) and IOSC (International Organization of Securities Commissions) will impose strict restrictions on the global applicability of this cryptocurrency. Last week, Randal Quarles, chairman of the FSB (Financial Stability Committee), called for a more rigorous review of retail payments using cryptocurrencies.
A Facebook spokesperson said:
“The review we have seen is what we are looking forward to and welcome. We announced this plan earlier, with the aim of making this discussion public and collecting feedback.”
Libra plans to invest its clients' funds in government bonds and currencies to build a reserve that stabilizes Libra prices. A representative of Facebook told Reuters that these foreign exchange reserves will follow the monetary policy of foreign exchange countries. He added that Libra does not intend to obtain a local banking license.
Regardless of local laws, the total cost of applying for seamless global operations is unclear. The company will need to establish a compliance network to monitor money laundering, tax evasion and fraud, appease consumer protection regulators, and establish a KYC agreement for each country involved in its business.
Pascal Bouvier, partner at MiddleGame Ventures, said:
“I think the risks and rewards are quite different – they are very big.”
Considering the anti-monopoly barriers Facebook has faced and the challenge of subverting global finance through the system launched in 2020, at least one analyst predicts that Facebook has not fully considered their position.
“One year is enough to meet with regulators to find out what is really troublesome and narrow it down to a range,” said former US Commodity Futures Trading Commission official Jeff Bandman.