Swiss institutions have expressed different views on Libra. While FINMA seems less concerned, the central bank points out potential risks for the country’s monetary policy.
Libra started with a big bang, and an ambitious mission: Enabling “a simple global currency and financial infrastructure that empowers billions of people.” The project has polarized and sparked controversy among the general public, crypto enthusiasts, and first of all politicians.
U.S. lawmakers have even attempted to stop Facebook from launching the currency in a written moratorium. But Libra is technically not owned by Facebook, and it’s not registered in the U.S. The Association has set up shop in Switzerland. But even here, not everyone welcomes the project.
FINMA says it will respond “with an open mind”
The Swiss banking sector regulator FINMA has last week reported on the licensing process for the Geneva-based Libra Association. According to FINMA, Libra will need at least a payment system license. Moreover, the watchdog also said that additional regulations would be necessary since Libra’s functionalities go beyond simple payment services and therefore carry increased “bank-like” risks.
The latter is a view that Libra wants to avoid, as being regulated like a bank would come with tight restrictions. Instead, Libra claims to be a stablecoin, which is placed in a standard framework for which additional regulation is not necessary. As noted by FINMA, the regulation of a stablecoin largely depends on its underlying asset. Libra could thus be subject to different rule-sets if it was pegged to securities like real estate or equity or only to fiat-currency.
Mark Branson, CEO of FINMA, said, “We are not here to make such projects impossible […] We will respond to them with an open mind, with an attitude that the same risks require the same rules.”
He also pointed out that Libra “is something which is being done transparently” and added, “I am much more nervous about projects which develop in a dark corner in the financial system somewhere, spread themselves out through cyberspace and one day are too big to be stopped.”
Central bankers point to risks for Switzerland’s monetary policy
While FINMA seems to be less concerned about Libra, the Swiss National Bank (SNB) has a different point of view. The president of the SNB said that stablecoins tied to fiat currencies threaten the country’s monetary policy.
Dante Disparte, Head of Policy and Communications for the Libra Association, said, “Our goal is a stable, secure, low-cost payment system that can expand access and improve financial services for billions of people. We are committed to ongoing engagement with central banks and financial regulators as we work toward that goal.”
In the meantime, the SNB has set up an innovation hub together with the Bank for International Settlements in Basel to investigate ways to implement its own digital currency.
Libra is going ahead despite the departure of its most prominent members
The regulatory situation of Libra in Switzerland is not yet entirely clear, but the project faces opposition, even in crypto-friendly Switzerland. “Libra won’t take off quickly in Switzerland,” says Herbert Scheidt, Chairman of the Swiss Bankers Association.
Additionally, the alliance has recently taken a huge hit internally. Paypal, Visa, and Mastercard, Libra’s most prominent founding members, have announced their departure from the project – a potentially fatal blow to Libra‘s global ambitions. Visa said it might re-examine a potential membership in the Libra Association if and when Facebook can “fully satisfy all requisite regulatory expectations” in its development of Libra.
Nevertheless, the project goes ahead. The 21 remaining founding members met in Geneva last Monday and signed onto the Libra Charter. Director General Bertrand Perez said, “We now have a total guarantee of their involvement, so we have confidence in the project.”