Since Facebook unveiled the Libra white paper back in June, the project has faced opposition from governments and regulators around the world. Just when commentators thought that the global stablecoin has found some solace in Switzerland, the Swiss had other ideas. Switzerland’s financial regulator has affirmed that it is open to international cooperation and oversight of the way it decides to regulate Libra network.
The Swiss watchdog spoke only days after Jerome Powell, the chairman of the US Federal Reserve said that Libra will have to adhere to higher regulatory standards. Mark Branson, the Financial Market Supervisory Authority (FINMA) director, said in a September 12 Neue Zürcher Zeitung (NZZ) interview that it was illusory to think that one country can single-handedly regulate a project of Libra’s scope.
Libra is a perfect match for Switzerland’s regulatory framework
Branson said that Switzerland’s ambitions to evolve into a leading financial center will expose the country to reputational risks. Therefore, it will attract international attention. He commented:
“Shy of these risks, you have less attention, but may end up in insignificance”
The country has a strong supervisory and regulatory infrastructure that can cater to the needs of major legacy financial players. Simultaneously, the existing framework can address the needs of these ambitious new fintech projects like Libra.
Branson is convinced that FINMA needs no foreign pressure to determine the primary challenges that Facebook’s project poses for regulators. He said:
“It was crystal clear from the start that this project could have huge dimensions and implications.”
Similar to the supervision of large Swiss banks like Credit Suisse and UBS which does not happen in complete isolation, Libra will also be tackled via international consultation and coordination.
Branson also emphasized that FINMA’s approach to market regulation is technology-neutral and principle-based. Therefore, Libra “fits perfectly into our regulatory framework”. Notably, Switzerland never regulates all forms of institutions and products up to the last detail. Branson explained:
“We have just published a guide on how to classify stablecoins under Swiss law. And we show: it does not need new laws. The risks are well known, for example regarding money laundering, customer protection, and system stability. There are already regulations for all of these.”
It is not a ‘beauty contest’ seeking the most lenient regulators
Branson also took his time to insist that the selection of Switzerland as its base does not mean that Facebook was shopping around in search of the most open-minded jurisdiction. He stated:
“Such a ‘beauty contest’ does not exist. Our first contact with the initiators happened after the decision for Switzerland had already been made and communicated. That’s positive. The ‘jurisdiction shopping’ you alluded to would be very sensitive. It would put pressure to get as loose as possible standards.”
According to earlier reports, the social media giant company has sought an extensive assessment from FINMA as it gets ready for a prospective application for a Swiss payment system license.
Branson confirmed on September 12 that the project will qualify expressly as a payment system as it is currently visualized. However, it would potentially attract more regulatory requirements associated with any other risks that could arise when Libra decides to provide a wider set of services.
