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It was only recently that Facebook (NASDAQ:FB) rocked the crypto world by launching its own cryptocurrency called Libra. Now details have emerged that Facebook is actively pursuing a payment system license from the Swiss financial regulator, FINMA. The Libra Association, which has been tasked by Facebook to oversee the proposed cryptocurrency, said in a statement that, “We are engaging in constructive dialogue with FINMA and we see a feasible pathway for an open-source blockchain network to become a regulated, low-friction, high-security payment system.” Obviously, Switzerland seems to be a logical choice for the debut of this unconventional payment system given the country’s long history of ardent adherence to banking secrecy and financial privacy.
Facebook has envisioned Libra as a blockchain-based digital currency backed by a basket of fiat currencies including the U.S. Dollar, Pound Sterling, Euro, Yen, and the Singapore Dollar. This fiat backing is meant to ensure the reduction in volatility that seems to have become the hallmark of cryptocurrencies over the recent past. However, according to initial reports, the Chinese Yuan will not be included in this basket even though the said currency is a constituent of IMF’s Special Drawing Rights (SDR), an international reserve asset that serves as a unit of account for the IMF and a few other multilateral organizations.
According to Facebook, the Libra digital wallet will serve as a repository for the said cryptocurrency and will be accessible from Facebook’s Messenger and Whatsapp in addition to a dedicated app called Calibra. Consequently, Libra has the potential of revolutionizing the global financial sector by providing cheap and accessible financial services to its 1.7 Billion users around the world. Even so, the greatest utility of this initiative will be recognized by the unbanked population in developing countries where conventional banking is unable to provide dedicated financial services.
Nevertheless, challenges abound for the nascent project. Even though Facebook can make Libra accessible to the masses without complying with jurisdictional financial regulations, it nonetheless has chosen full compliance with such regulations in order to alleviate concerns raised by regulatory authorities around the world. However, the initiative continues to face stiff resistance from the US Treasury and other officials (read our coverage here) who remain skeptical regarding the Libra Association’s ability to adhere to a multitude of financial regulations spanning numerous jurisdictions. Moreover, the Financial Action Task Force (FATF), a global money-laundering watchdog, has also raised significant terror financing and money laundering concerns vis-à-vis Libra. Furthermore, given Facebook’s involvement in the eponymous Cambridge Analytica scandal, privacy experts have continued to question the rationale behind awarding the tech giant even more influence over its users’ day-to-day lives.
It remains to be seen how effectively Facebook is able to navigate the labyrinth of hurdles that still remain before Libra is officially launched. Crypto enthusiasts, however, will no doubt be jubilant over this development as it brings the entire cryptocurrency matrix one step closer to mainstream adoption.