Update (07:45 UTC, Sept. 12 2019): Added statement from the Libra Association, and clarified that the association is not a company but a member-run non-profit.
The non-profit membership organization set up to run Facebook's Libra cryptocurrency project is seeking to apply for licensing as a payment system in Switzerland.
Swiss financial regulator FINMA confirmed in a guidance note on stablecoins Wednesday that it had received a request for an assessment of how it would classify the Libra project as currently planned. The agency added that range of services projected by the Libra Association would need extra oversight.
In an "indicative classification" of the Libra project, FINMA said a project would fall under financial market infrastructure regulation and, as currently planned, "would require a payment system licence from FINMA."
Regulators globally have been raising concerns that Libra would raise the risk of money laundering via its global cryptocurrency available to billions of Facebook users. Just yesterday, U.S. Treasury official Sigal Mandelker said Facebook’s Libra must meet the highest standards of regulatory compliance prior to any launch.
A Swiss payment system is "automatically subject" to the Anti-Money Laundering Act, FINMA said.
The watchdog hinted at the breadth of regulation Libra would require, saying:
Such additional requirements "would relate in particular to capital allocation (for credit, market and operational risks), risk concentration and liquidity as well as the management of the Libra reserve," FINMA said.
One condition for being granted a Swiss payment system license would be that the "returns and risks" related to 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."
With Libra planned as a global project, it will require international coordination from regulators, FINMA said, especially the definition of requirements for managing the reserve and its governance, as well as to address the risk of money laundering.
Global money-laundering watchdog the Financial Action Task Force (FATF) is also said to be looking into Libra, as per a Reuters report from Tuesday.
“We want to make sure that if there are significant risks, they need to be addressed,” said FATF president Xiangmin Liu.
The Libra Association told CoinDesk:
The association further stated that "financial inclusion, regulatory compliance, and consumer protection are not competing objectives, but rather work in lockstep with the Association’s goals of offering a simple global currency and financial infrastructure that empowers billions of people."
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.