Facebook has a dream: to become an accessible, decentralized, frictionless, and globally available crypto payments network. However, to achieve it, the social media giant will have to fight against the current challenges; especially considering the different regulation challenges that will arise in specific locations.
The company will face what Reuters, in its latest report, defines as regulatory obstacles. They will be plentiful, as Facebook and the Libra Network will have to convince financial watchdogs in several countries. This week, though, the social networking app and services provider took a considerable step forward.
The Path towards Regulation
Calibra, which was announced last month as the Facebook subsidiary that will have the responsibility of developing a wallet and other financial services for the cryptocurrency ecosystem, registered this week with the United States Financial Crimes and Enforcement Network (FinCEN) as a money services business. According to reports, Calibra applied for money-transfer licenses in America and started the process of earning a BitLicense from the Department of Financial Services in New York.
The path towards regulation will need to include full cooperation and orchestration with financial agencies, central banks, and law enforcements, involving “literally hundreds, perhaps thousands, of licenses from hundreds of different regulators,” according to the Founder and Chief Investment Officer at Anthemis, Sean Park.
Of course, since the United States of America will not be the only country in which Facebook plans to engage investors and users with the use of the Libra coin, the firm has also began the process for regulation in the United Kingdom. They have spoken with officials at Britain’s Financial Conduct Authority and the Bank of England. Facebook has also reached to the FINMA, which happens to be the financial watchdog in Switzerland.
The Swiss authorities have stated that they will treat Libra as any other cryptocurrency or digital asset. The same has been said in Russia, specifically by the Ministry of Finance. These are welcomed news, but it means that there is still work to be done for Libra to reach its full potential. Park says that Facebook “will not get a free pass anywhere.”
Naturally, the whole world reacted to Libra’s announcement last month. The mentioned reactions, however, were mixed. Officials in European countries, the United States, and India stated that they would examine the project with a closer look just hours after the project was unveiled. The Singapore Central Bank expressed that more data is needed to provide its stance.
Since the potential influence of Libra, being a Facebook project, is immense, it has been under scrutiny ever since rumours began to swirl. For instance, its privacy policies have been criticized, especially coming from a network that is known to perform privacy-invasive practices.
Barry Lynn, the Executive Director of Open Markets Institute, said that “this is a corporation that’s got fires all over the world with regulators. It’s only going to get worse.”
“The scrutiny that we’ve seen is something that we expected and welcome. We announced this early by design in order to have this discourse in the open and gather feedback,” Reuters quoted an anonymous Facebook spokesperson as saying.
However, if everything goes according to Facebook’s plan, the repercussions would be enormous. “I would say the risks are commensurate with the returns – potentially huge,” according to Pascal Bouvier, managing partner at MiddleGame Ventures.
Since Libra will not be officially launched until the first half of 2020, we still have time to see how everything, including regulation advances, unfolds.
By Andres Chavez