Facebook’s Cryptocurrency Plans Draw Scrutiny
03 Jun 2019

Facebook has yet to detail its plan to jump into the cryptocurrency sector but already one thing is clear: it’s not planning on doing so timidly.

The social media giant expects to roll out a proprietary blockchain-backed payment system by next year, but the initiative will be “bigger and more open” than just a means to transact within its online platform, according to a report by the Financial Times, which cited three individuals who are familiar with the project.

The company’s “GlobalCoin,” which will be pegged to the dollar to ensure stability, could launch in around a dozen countries with an eye toward expanding its user base to the 1.7 billion unbanked adults across the globe, the newspaper said. As with telecommunications-based payment services, users of the planned cryptocurrency would only need access to a smartphone to send or receive funds.

But Facebook’s entrée into the sector could bring “big regulatory headaches,” particularly when it comes to anti-money laundering and know-your-customer obligations, Rebecca Harding, an executive with Coriolis Trade Technologies and a former chief economist at the British Bankers’ Association, told the Financial Times.

That’s because neither Facebook nor cryptocurrencies are regulated to the degree that banks are, Harding told the newspaper.

Such concerns have already prompted the heads of the US Senate Banking Committee to send a formal query to Facebook earlier this month, asking how the cryptocurrency would work and whether it has engaged with financial institutions to ensure that the project complies with regulatory obligations.

The letter, which also highlights congressional concerns about Facebook’s efforts to protect client data, cites a report by the Wall Street Journal detailing the company’s hiring of dozens of individuals from financial firms and crypto-related companies as part of the project.

In recent months, Facebook has hired two compliance officers from the popular crypto-exchange Coinbase, according to a report by online news service CoinDesk.

Facebook founder Mark Zuckerberg discussed the project in April during a meeting with Bank of England Governor Mark Carney, and the company has separately sought input from the US Treasury Department on operational and regulatory issues, the BBC reported last week.

The company, which has been in talks with banks and other firms that could facilitate the rollout of GlobalCoin, registered Libra Networks, a tech company, in Geneva earlier this months, according to Reuters. Libra will focus on “investing, payments, financing, identity management, analytics, big data, blockchain and other technologies,” Reuters said, citing plans submitted to Swiss authorities.

The initiative comes as the Financial Action Task Force and national governments continue to weigh how blockchain payments and cryptocurrency exchanges should be regulated and supervised for money laundering risks.

Photo: Minette Lontsie [CC BY-SA 4.0], via Wikimedia Commons

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