A growing number of governments have responded to Facebook’s
cryptocurrency plans including China, France, India, Japan, South Korea,
Russia, Singapore, Thailand, the U.K., and the U.S. Several
intergovernmental organizations have also weighed in such as the
European Central Bank and the Bank of International Settlements.
Facebook’s Libra Project
Facebook unveiled
its plans last month for newly formed subsidiary Calibra which aims to
provide financial services via the Libra network. “The first product
Calibra will introduce is a digital wallet for Libra, a new global
currency powered by blockchain technology. The wallet will be available
in Messenger, Whatsapp and as a standalone app — and we expect to launch
in 2020,” the social media giant announced. Calibra has been providing
information to central banks worldwide regarding its Libra plans to
create understanding and exchange information, according to Calibra CEO
David Marcus.
Regarding which countries Calibra will be available in, a Facebook
spokesperson told news.Bitcoin.com on July 9 that “Calibra won’t be
available in U.S.-sanctioned countries or countries that ban
cryptocurrencies,” elaborating:
The Libra blockchain will be global. It will be up to
custodial wallet providers to determine where they will and will not
operate.
United States
Lawmakers in the U.S. have been actively taking initiatives in
response to Facebook’s Libra announcement. During his semi-annual
testimony on monetary policy before the House of Representatives
Financial Services Committee on July 10, Federal Reserve Chairman Jerome
Powell said:
Libra raises many serious concerns regarding privacy, money laundering, consumer protection and financial stability.
He added, “I don’t think the project can go forward” without
addressing those concerns, noting that the Fed has established a working
group to follow the project and is coordinating with other central
banks across the globe.
“Facebook has a couple billion-plus users, so I think you have for
the first time the possibility of very broad adoption” of
cryptocurrency, the Fed chair continued, emphasizing that any problems
that could emerge through Libra “would arise to systemically important
levels just because of the mere size of Facebook.”Five Democratic lawmakers, including Rep. Maxine Waters, chairwoman of the House Committee on Financial Services, sent a letter
to Facebook executives on July 2 “requesting an immediate moratorium on
the implementation of Facebook’s proposed cryptocurrency and digital
wallet,” the press release posted on the government’s website details.
The announcement reads:
Because Facebook is already in the hands of over a
quarter of the world’s population, it is imperative that Facebook and
its partners immediately cease implementation plans until regulators and
Congress have an opportunity to examine these issues and take action.
The letter continues: “During this moratorium, we intend to hold
public hearings on the risks and benefits of cryptocurrency-based
activities and explore legislative solutions. Failure to cease
implementation before we can do so risks a new Swiss-based financial
system that is too big to fail.”
The U.S. Senate Banking Committee is holding a hearing on Libra on
July 16, followed by a House Financial Services Committee hearing the
next day. Calibra’s Marcus is scheduled to testify before both
committees. According to him, the subsidiary has applied for state money
transmitter licenses and is registered with the U.S. Treasury
Department’s Financial Crimes Enforcement Network.
In addition, more than 30 groups including the Consumer Federation of
America, the Economic Policy Institute, and the U.S. PIRG have asked
lawmakers to intervene with the project. “We call on Congress and
regulators to impose a moratorium on Facebook’s Libra and related plans
until the profound questions raised by the proposal are addressed,”
their July 2 letter reads.
China
The People’s Bank of China (PBOC) is paying “high attention” to
Libra, said Wang Xin, director of the central bank’s research bureau,
South China Morning Post reported on July 8. According to the news
outlet, the director warned that Libra could have a major impact on
monetary policy and financial stability, elaborating:
Facebook’s plans to create its own cryptocurrency have
forced China’s central bank into stepping up research into creating its
own digital currency as Libra could potentially pose a challenge to
Chinese cross-border payments, monetary policy and even financial
sovereignty.
Mu Changchun, deputy director of the PBOC’s payments department, said
that Libra “must be put under the oversight of monetary authorities,”
Bloomberg reported the same day. He told the publication that, as a
convertible cryptocurrency or a type of stablecoin, Libra “will not be
sustainable without the support and supervision of central banks,”
asserting:
In the longer term, the yuan will be damaged by Libra if it’s not convertible.
He further revealed that the central bank’s research team tested
Libra’s code and found that it’s “still in an initial stage and the
quality of the code isn’t stable,” and there are also questions such as
whether Libra would use blockchain technology, the publication conveyed.
India
India is currently deliberating
on the regulatory framework for cryptocurrency, which was drafted by an
interministerial committee headed by Finance Secretary and Secretary of
Economic Affairs Subhash Chandra Garg. Bloomberg reported him as saying
in an interview on July 6:
Design of the Facebook currency has not been fully
explained … But whatever it is, it would be a private cryptocurrency and
that’s not something we have been comfortable with.
The Indian government has not announced the crypto regulation, which has led to rumors such as a draft bill to ban cryptocurrencies. Further, the central bank, the Reserve Bank of India (RBI), has prohibited
regulated financial institutions from providing services to crypto
businesses since September last year. The country’s supreme court is
scheduled to hear a number of writ petitions against the RBI ban on July 23.In the meantime, the Facebook spokesperson confirmed to news.Bitcoin.com on July 9:
There are no plans to offer Calibra in India.
Singapore
The Monetary Authority of Singapore (MAS) published its answers to
questions from Parliament regarding Libra on July 8. “It is in the early
stages of development, with a number of issues to be worked out around
its features, use cases, and governance arrangements,” the central bank
wrote. “Like other regulators around the world, MAS will make an
informed assessment of the potential benefits and risks of Libra once
these details become clear.”
In Singapore, the Payment Services Act (PS Act) covers
cryptocurrencies, as well as e-money, and domestic and cross-border fund
transfers. The MAS clarified:
Depending on its nature, Libra may be regulated under the
PS Act, and be subject to requirements on anti-money laundering and
countering the financing of terrorism imposed under the MAS Act.
“As for personal data privacy, all entities operating in Singapore
that collect personal data are subject to the requirements of the
Personal Data Protection Act,” the central bank continued. “MAS will
continue to engage Facebook on its plans for Libra, and consider
appropriate regulatory responses once they are clear.”
Thailand
Facebook has requested a meeting with the Bank of Thailand (BOT) to
seek authorization from the central bank to integrate Libra into the
Thai financial system, according to Siritida Panomwon, Assistant
Governor for Payment Systems Policy and Financial Technology Group at
the BOT. Thailand has approximately 50 million registered Facebook
users. At press time, the meeting has yet to be confirmed.
Panomwon told the press on July 5 that a committee has been
established to examine Libra. It comprises experts from the central
bank’s foreign exchange, payments and legal teams, Xinhua reported. She
was quoted as saying:
The BOT will study Facebook’s whitepaper … because
consumer benefits and risks incurred from the digital currency are the
central bank’s main focus.
Other than security concerns, the BOT will look into the stability of
Libra’s value, currency model mechanism and public protection against
fraud, she revealed. The bank has also set up a working group to study
Libra, and is in discussion with the country’s Securities and Exchange
Commission (SEC) and other related parties on the subject.
On July 8, SEC Assistant Secretary-General Praoporn Senanarong
confirmed that the commission is preparing to discuss guidelines for
Libra with the BOT since it is both an asset and a medium of exchange.
She clarified that Libra is not under the supervision of the SEC based
on the country’s current regulation for digital currencies.
Japan
The Bank of Japan (BOJ) is concerned that “the difficult-to-regulate
coin will pose a risk to financial systems while exploiting their
existing structure at no cost,” Nikkei reported July 3. BOJ Governor
Haruhiko Kuroda told reporters that he intends to “keep careful watch”
for whether cryptocurrencies would gain acceptance as a method of
payment, as well as how they might affect financial and payment systems.
BOJ Deputy Governor Masayoshi Amamiya explained on July 5 that
digital platform operators such as Facebook must comply with regulations
on money laundering and risk management, Reuters reported. Noting that
Facebook’s crypto plan is still sketchy, he urged central banks to be
vigilant to the impact such moves could have on their country’s banking
and settlement systems, emphasizing:
As for Libra, we must bear in mind that the potential global user-base could be enormous.
Meanwhile, Japan’s top financial regulator overseeing crypto exchange
operators, the Financial Services Agency (FSA), is leaning on the view
that Libra “is likely not to be a crypto asset,” Nikkei reported. The
FSA previously told news.Bitcoin.com that under current regulations, stablecoins are not considered cryptocurrency.
South Korea
South Korea’s top financial regulator, the Financial Services
Commission (FSC), published a report on “Understanding Libra and Related
Trends” on July 8, Yonhap reported. The regulator explained:
We have seen that Libra is more likely to be
commercialized than existing virtual currencies … Libra will have a big
impact on the existing financial system, banking industry and financial
consumers.
The report raises concerns that much of the detail about Libra is
still unknown and there is a possibility that personal information will
be leaked. Moreover, it notes that “If bank control is not achieved,
Libra may turn into a money laundering solution.”
Russia
Cryptocurrency is currently unregulated in Russia, but the country
plans to adopt the bill “On digital financial assets” which will
regulate the use of cryptocurrencies in the country. Deputy Finance
Minister Alexei Moiseev said that Russia will not have a separate
regulation for Libra, Interfax reported on July 1. He described:
There will be rules for all cryptocurrencies that are being traded.
“That is, it will be possible to buy, sell, store it, but it cannot
be used, in fact,” Moiseev was quoted as saying. “No one is going to
ban. A large number of businesses ask when it will finally be possible
to legally conduct an ICO transparently, this will definitely be
regulated, permitted, and that’s all,” he added.
United Kingdom
The UK’s Financial Conduct Authority (FCA) and other regulators have
met Facebook representatives to discuss the plans for Libra. Christopher
Woolard, the executive director of strategy and competition at the FCA,
has highlighted a series of potential issues with Libra, from consumer
protection and privacy concerns to financial market stability, the
Guardian reported. Woolard asserted:
Its size and scale will pose questions for society and
government more generally about what is acceptable and desirable in this
space.
He clarified that the regulator would look at whether Libra and other
crypto assets functioned in similar ways to other regulated investment
vehicles, adding that “The issues raised here require deep thought and
detail.”
Commenting on Libra at a meeting in Portugal, Bank of England
Governor Mark Carney said that “Anything that works in this world will
become instantly systemic and will have to be subject to the highest
standards of regulation,” Bloomberg reported.
France and the G7
France’s Finance Minister Bruno Le Maire said Libra would be fine if
its use is limited to transactions, emphasizing that Facebook shouldn’t
be allowed to create a sovereign currency, Reuters reported.
France currently holds the rotating presidency of the G7. The
country’s central bank governor, Francois Villeroy de Galhau, said on
June 21 that a G7 task force will be created to study how central banks
ensure cryptocurrencies like Facebook’s Libra are governed by
regulations ranging from money-laundering laws to consumer protection
rules. It would be led by European Central Bank board member Benoit
Coeure. Villeroy told finance industry officials:
We want to combine being open to innovation with firmness on regulation. This is in everyone’s interest.
ECB and BIS
Several intergovernmental organizations have also weighed in on
Libra. European Central Bank Executive Board member Benoit Coeure said
on July 7 that “Financial regulators must act fast to prepare for the
push by U.S. tech giants such as Facebook Inc. into the financial
system,” elaborating:
It’s out of the question to allow them to develop in a
regulatory void for their financial service activities, because it’s
just too dangerous … We have to move more quickly than we’ve been able
to do up until now.
Coeure believes that the development of digital currencies is
exposing deficiencies in existing regulation and the failure of the
banking system to adopt new technology. He was quoted by Bloomberg as
saying, “All these projects are a rather useful wake-up call for
regulators and public authorities, as they encourage us to raise a
number of questions and might make us improve the way we do things.”
Meanwhile, the Bank for International Settlements, the Basel-based
financial institution owned by 60 central banks, said last month that
“Politicians need to quickly coordinate regulatory responses to new
risks as Facebook and other tech firms move into finance.”
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