Following the skeptical comments, Switzerland’s Financial Market Supervisory Authority (FINMA) has finally issued new guidelines applicable to stablecoins. Beside, stablecoins in general, FINMA specifically highlights the directions for Facebook’s proposed cryptocurrency, Libra.
FINMA Acknowledges Facebook Libra Association’s Receipt
Since Facebook’s launch announcement of Libra, big governments and central banks haven’t left any opportunity to scrutinize all aspects revolves around Libra and its partaking in a global financial system. In fact, the recent report on upcoming Chinese cryptocurrency reveals that it bears similarities of Facebook’s Libra.
However, in terms of regulations, Libra’s official website recently shared its approach towards pursuing a payment system License under FINMA lead Supervision. Soon after Libra’s post, FINMA also officially published a detail report over stablecoins including Facebook’s Libra cryptocurrency
It’s worth noting that the Libra Association had submitted FINMA a request to clarify a few aspects underlying the regulatory status of the Libra Coin as well as the Libra Association. The report also mentions the Association’s intention of receiving a payment system license from FINMA to“empower billions of people.”
FINMA – Libra Needs a License
On the other hand, FINMA’s guidelines report reads various aspects regulating the stablecoins. The regulator classifies stablecoins under the same law applicable for blockchain-based tokens. However, it states that the rules may differ with the nature of stablecoins as few stablecoins are backed by various assets such as currencies, real estate, securities, and commodities. FINMA in its guidelines report notes that;
“The concrete design of ‘stable coins’ can vary greatly in legal, technical, functional and economic terms. Therefore, no fully generic classification is possible,” FINMA wrote, continuing: “Money laundering, securities trading, banking, fund management, and financial infrastructure regulation can all be of relevance.”
Nevertheless, FINMA’s report comes as a response to Libra’s request sent early morning on Sep 11. It elaborates that the existing feature that Libra bears would require a payment system license from FINMA, based on the Financial Market Infrastructure Act (FMIA). With the acknowledgment of Libra’s request, FINMA noted the basic principle is ‘same risks, same rules.’ For example, for bank-like risks, bank-like regulatory requirements would apply.
Perhaps the best part of the report comes in a conclusion wherein the regulator outlines the ‘necessary condition for being granted a license as a payment system”. Accordingly, it states that the Libra Associations will be solely responsible for the returns and risks of managing Libra except “as in the case of fund provider- by the ‘stablecoin’ holders”.
Furthermore, FINMA felt the need for an international coordinated approach for “managing the reserve, to combat money laundering and the governance around it.” Conclusively, FINMA notes that the Libra’s nature of issuing payment tokens will be subject to additional requirements. Such extra requirements will be, capital allocation (for credit, market and operational risks), risk concentration and liquidity as well as the management of the Libra reserve, the guidelines mentioned.
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