Facebook shines as one of the most loved social networking sites in the modern era. With the growing craze for cryptocurrencies, Mark Zukerberg led social media giant, planned to explore the new domain by launching its stablecoin, Libra.
Despite hailing from a reputed and popular brand name, Facebook’s Libra had to bear negative publicity concerning regulatory standards and implementation.
On September 11, 2019, Libra faced another shock when FINMA, the financial market Czar of Switzerland, announced that the cryptocurrency would have to face stringent Swiss scrutiny for setting off from the base. These laws will be equivalent to the strict rules which are typically applied to the banking sector, including anti-money laundering laws.
FINMA stated that Libra would be more than just a global payments network and so would be subjected to an extra stringent scanning regime. The platform emphasized that the regulators will keep a thorough check on all the aspects associated with Libra, including liquidity, capital appropriation for risk, management of reserves, etc.
“For bank-like risks, for example, bank-like regulatory requirements would apply,” said FINMA. Libra project, in its attempt to get away with the risk of volatility, has planned to back its coins by a reserve of assets involving bank deposits and short-term government securities, held by a network of custodians.
FINMA made it clear that the risks and returns concerning the reserve created by Libra should be borne by the cryptocurrency Association without putting the burden on the coin holders.
The highest international anti-money laundering standards would need to be ensured throughout the entire ecosystem of the project.
US Authorities Take on Libra:
A senior US Treasury official said that Facebook’s cryptocurrency project must comply with the highest standards against money laundering and terrorist financing to begin its operations.
Libra has been under constant pressure from the regulators globally since its announcement in June. The financial heads fear that the new cryptocurrency could bring destabilization in the financial system worldwide.
Sigal Mandelker, Secretary of Terrorism and Financial Intelligence, US, affirmed that any cryptocurrency project, including Libra, working in the United States would have to fulfill US regulatory protocols by all means.
“Whether it’s bitcoin, Ethereum, Libra, our message is the same to all of these companies: anti-money laundering and combating the financing of terrorism has to be built into your design from the get-go,” quoted Mandelker.