Facebook's Libra cryptocurrency has applied for guidance on obtaining a payment licence from Swiss regulator Finma, prompting the financial watchdog to update its rulebook on the treatment of stable coin projects.
In the supplement to its Guidelines on Initial Coin Offerings (ICOs), Finma says its treatment of stable coins follows the existing approach taken to blockchain-based tokens, with a focus on the economic function and the purpose of a token on a case-by-case basis.
The watchdog says Libra's approach would require a payment system licence under the Financial Market Infrastructure Act (FMIA).
Finma says the services planned by the Libra project would go beyond those of a pure payment system and would be subject to more stringent regulatory requirements around capital allocation, risk concentration and liquidity as well as the management of the Libra reserve.
Exercising an abundance of caution, Finma expresses the view that the planned international scope of the project requires an internationally coordinated approach.
"In particular, the definition of requirements for managing the reserve, and the governance around it, as well as for combating money laundering should be developed in international coordination," states Finma. "Other questions raised in the context of the Libra project, such as those relating to tax law, competition law or data protection law, go beyond the scope of supervisory law and are therefore outside Finma’s remit."
Despite a worldwide regulatory backlash about the project, the Libra Association is bullish about its prospects, sating: “We are engaging in constructive dialogue with Finma and we see a feasible pathway for an open-source blockchain network to become a regulated, low-friction, high-security payment system.".