Swiss say Libra needs license, anti-money laundering controls
Switzerland said Facebook Inc.’s planned Libra cryptocurrency would need an official green light, with granting of a license contingent on the risks of reserve management being borne entirely by the organization and not by stable-coin holders.
Swiss financial regulator Finma said the project would need a payment system license and would be subject to additional rules to take “bank-like” risks into account. The “highest international anti-money laundering standards” would also need to be applied, it said in a statement on Wednesday.
“A necessary condition for being granted a license as a payment system would be that the returns and risks associated with the management of the reserve were borne entirely by the Libra Association and not—as in the case of a fund provider—by the ‘stable coin’ holders,” Finma said.
Facebook has picked the Swiss city of Geneva as the home of the Libra Association, a not-for-profit organization that will govern the payment network and manage the digital currency. Stable coins typically peg their value to an underlying asset, like a currency and the issuers backs up the value by holding that asset.
Expected to be launched in 2020, Libra is described as a blockchain-based digital coin that will let Facebook users send and receive money or to pay for services. Yet the project has raised eyebrows in a number of countries, and even if it’s based in Switzerland it will have to comply with U.S. anti-money laundering standards.
Finma confirmed it had been approached by Libra for an assessment of how it would apply the law. Citing the complexity of the proposed payment system, the Swiss regulator stressed the need for an globally coordinated approach and said defining the rules on reserve management and governance, as well as thwarting any crime, should be developed internationally.