Controversial Facebook cryptocurrency, Libra made headlines with the announcement that Swiss regulators are issuing blockchain guidelines for Libra and other stablecoins. In an attempt to bring about some clarity and solidify its legitimacy, the Libra association requested the Swiss Financial Market Supervisory Authority (FINMA) to disclose how the Switzerland government intends to respond to the network when it launches in 2020. Based on a notification released by FINMA, the Swiss regulators have stated that they view Libra as a financial infrastructure; meaning they intend to address Libra and other stablecoins in a similar vein to regular blockchain tokens. This is excellent news for Libra which has received staunch criticism from US regulators and financial experts all over the world since its conceptualization.
Blockchain Guidelines are Crucial for Libra
One of the biggest problems plaguing the blockchain industry is uncertainty and lack of regulations. Without proper blockchain guidelines, developers and entrepreneurs become skeptical about entering the industry. This is because the lack of rules means that new regulations are arriving in the future that may mandate blockchain businesses to make drastic changes. In addition, this could lead to several unforeseen and mostly detrimental consequences.
Furthermore, Libra is a heavily centralized cryptocurrency that is owned and managed by the Libra association; a group of 28 conglomerates including Facebook. After its launch, it could eventually become the default currency for transactions across these 28 multinational companies (including Visa, MasterCard, Paypal and Uber, etc) and their subsidiaries. The Libra association will then be in charge of processing and controlling several financial transactions globally; this will make them the most powerful corporate entity on the planet. Logically, governments all over the world are not comfortable with this prospective future.
France has recently called for the outright ban on Libra in Europe. During an OECD conference dedicated to cryptocurrencies, the French economic minister Bruno Le Maire stated that Libra poses a considerable threat to financial security and stability in Europe.
Le Maire quipped the following:
“I want to be absolutely clear. In these conditions, we cannot authorize the development of Libra on European soil.”
He went further to warn that “the monetary sovereignty of the (European) states is in play.”
The Libra association’s managing director and COO, Bertrand Perez, has pushed back against these claims. According to him, Such claims “do not seem to us to be justified. […] It is their monetary policies that will influence the Libra through the basket and not the other way around.”
The Germany Perspective
France isn’t alone; it appears Germany has criticism to offer as well. According to reports by a local magazine, Der Spiegel,Thomas Heilmann, a member of Chancellor Angela Merkel’s Christian Democratic Union of Germany (CDU) party has said that the government will not “allow market-relevant private stablecoins” to exist in the country. he further added that “Once a digital currency provider dominates the market, it will be quite difficult for competitors.”
According to him, this could lead to inflation which his government has kept at bay through its central bank policies. Whether France and Germany can compel other European states to take a hard stance on Libra remains to be seen.
Stablecoins are Evolving
Once upon a time, Stablecoins were scarce in the crypto market, today there are more than a dozen of them, including Libra. These type of cryptocurrencies seeks to solve different problems, including solvency, transparency, and volatility. However, stablecoins are trying this approach. Unlike regular stablecoins usually pegged to just one fiat, these global-dominance focused stablecoins seek to have a basket of fiat backups that goes beyond the US dollar and could encompass other currencies like the Euro and Yen.
In addition, other companies like eToro and Wirex are working on similar stablecoins which are backed by many global fiat currencies. Many of these projects are speeding up their developments to prevent Libra from dominating the stablecoin space.