While there are high hopes that Libra – the planned crypto currency of social media giant Facebook set to be launched in 2020, would be recognized globally as a legal tender within a year, there are many analysts who believe that the proposed digital currency from the company could be faced with unprecedented regulatory scrutiny.

According to a report published by the news agency Reuters, interviews with more than a dozen people with experience in financial regulation, financial technology, payments or crypto currency has indicated that it would be very unlikely that government agencies would take a light view of it.

US lawmakers and regulators across the globe made negative comments as soon as Facebook announced the plans for launching Libra about 10 days ago. They were concerned about the huge size and the utterly careless attitude of the company about user data and privacy.

There needs to be closer regulatory scrutiny globally before crypto-assets can be used widely for retail payments, said Randal Quarles, chair of the Financial Stability Board, the agency that coordinates financial rules for G20 countries. Amongst the least regulated areas of finance are crypto currencies such as bitcoin.

“It’s a complete disaster from a regulatory perspective,” said Barry Lynn, executive director of antitrust advocacy group the Open Markets Institute. “This is a corporation that’s got fires all over the world with regulators. It’s only going to get worse.”

Facebook’s plans involving Libra include accepting deposits from customers and investing them again in government bonds. It also plans to hold conventional currencies in reserves and offering cross-border services. The company also however said that it would require holding close coordination and engagement with central banks, financial regulators and enforcement authorities across the world to allow users to transact in the new crypto currency.

Calibra, a subsidiary that Facebook has formed to handle Libra, has already applied for money-transfer licenses in the United States, said a spokesman of the company. It has also got itself registered with the US Financial Crimes and Enforcement Network (FinCEN) as a money services business, the spokesman added.

“The scrutiny that we’ve seen is something that we expected and welcome,” a Facebook spokesman said. “We announced this early by design in order to have this discourse in the open and gather feedback.”

The spokesman said monetary policies of countries where funds are located would be applicable for the reserves. He added that there are no plans for applying for local business licenses by Calibra.

In partnership with a number of major partners, governing the new coin and holding of reserves would be done by Facebook through a Geneva-based association. Facebook said that the first half 2020 is the target for launching the whole system and the company plans to ultimately be able to offer a wider range of financial services such loans.

“They will not get a free pass anywhere,” said Sean Park, Founder and Chief Investment Officer, at Anthemis, a venture capital firm that backs digital financial services companies. “And, given their intention to be global, they will ultimately need literally hundreds, perhaps thousands, of licenses from hundreds of different regulators across the globe.”

(Adapted from CryptoCredits.net)

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