Facebook’s Libra May Be Subject to Bank-Like Regulations: Swiss Financial Regulator. Here’s The ‘Risk’ Summary.

Facebook’s Libra project is constantly on the radar of regulators. After US regulators now Swiss financial authorities have also made it clear that Libra will be subject to the most rigorous regulations ever. The kind of regulations which have not been applied to any other cryptocurrency project till now.

The news in this regard comes from FINMA, the financial regulator of Switzerland. After Geneva-based Libra Association revealed that it plans to become a “licensed payments system”, the regulator issued a statement confirming the same.

The statement made 4 crucial points, which is summarized for you:

1. The Libra ecosystem will be subject to the highest anti-money laundering (AML) standards;
2. Libra can be more than a global payment system, which means greater risks. So it must also be subject to the additional requirements corresponding to those risks. “Same risks, Same rules”, it said.
3. The risks and returns associated with Libra’s reserves must be borne by Libra Association itself – not by the holders of its stablecoin;
4. Libra will create risks related to taxation, competition, and data protection; but those risks don’t come under the purview of FINMA.

Among all these points, the second one is the biggest bombshell for Facebook. ‘Same risks, same rules’ means the scope of regulations imposed upon Libra will be directly linked to the scope of its activities. Here’s how FINMA puts it in a statement:

“The additional requirements would be based on recognised standards for similar activities in the financial markets and would need to reflect the dimension of the project.”

For example, in the case of bank-like risks, Libra will be subject to bank-like regulations. These regulations would relate to capital allocation, risk management and liquidity, FINMA said.

As far as anti-money laundering standards are concerned, they generally revolve around tracking the movement of money. The highest AML standards mean that Libra Association may be forced to collect a lot of data about the transactions happening in its ecosystem. And obviously, the authorities will also ask it to provide that data whenever they need it.

So launching Libra is not going to be a cakewalk for Facebook. It may agree to comply with all these guidelines for launching its most ambitious project ever, but these things are not looking good for crypto’s core philosophies of censorship-resistance, decentralization, and user privacy.

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