Facebook’s nascent crypto-project Libra has been at the receiving end of regulators and financial authorities’ fury, ever since its official announcement on 18 June. The social media giant’s project has in fact, managed to ruffle quite a lot of feathers, with a few regulators going as far as to call for a complete ban on the project.
According to Christopher Woolard, Executive Director of Strategy and Competition at UK’s Financial Conduct Authority, Libra could disrupt the existing financial ecosystem and could make traditional payment institutions redundant, reported FStech. These comments were made by Woolard at the P20 Global Payments Conference in London yesterday.
The UK government and the country’s financial regulators, including the FCA have been known to be receptive to emerging FinTech technologies. However, like Woolard, many regulators around the globe have expressed grave concerns about the proposed working model of Libra. While the makers of Libra are calling it a stablecoin backed by a basket of fiat currencies, Woolard had made it clear last month that the FCA did not recognize it as a crypto-asset.
In fact, Woolard also listed out a set of questions for those planning to launch their crypto-assets to determine whether their product qualifies to be categorized under a digital asset class.
Is my product a beneficial innovation for consumers and markets? Or does it include hidden bugs and unmitigated risks?
Am I prepared to be open and cooperative with domestic and international regulatory agencies? How do I approach issues like anti-money laundering?
Will the target market I have in mind for this crypto asset be able to make an informed and balanced judgment of the risks and benefits of investing in or using such an asset?
Have I completed the regulatory, legal and technical due diligence in advance of launching a new product or service?
Woolard during a conference at the University of Cambridge in July had said,
“Historically, this may have been a sector that has lived by the mantra of ‘move fast and break things’, but the issues raised here require deep thought and detail. He added further, libra’s “size and scale will pose questions for society and government more generally about what is acceptable and desirable in this space.”
Regulatory concerns combined with undetermined Libra associates could force Facebook to postpone the launch
Libra’s working model describes it as an asset class independent of Facebook, where all the decisions about the asset will be taken by the Libra Association comprising of 28 companies, including the likes of PayPal, Visa, and MasterCard. The Libra stablecoin will be backed by a basket of fiat currencies. However, regulators believe that the working model of Libra has been designed to bypass the existing regulatory framework.
France, Germany have already called for the halt of any further development of the project, claiming that it threatened the financial sovereignty of their nations. Interestingly, both governments have no issue with mainstream cryptocurrencies and have found a way to conveniently regulate it.
Amid these raging voices, some members of the Libra Association are already having second thoughts, with PayPal, Visa, and Mastercard reportedly weighing in on whether they want to be associated with the project.