The Australian Prudential Regulation Authority (APRA) is seeking to oversee stablecoin projects and could soon regulate Facebook's controversial Global Stablecoin Libra.
If the proposed Global Stablecoin Libra gets off the ground and Facebook launches the Calibra digital wallet in Australia the US technology giant will need to meet minimum capital requirements and face other prudential regulation.
Published on the 20th January 2020 the APRA submitted an official statement to the Senate inquiry committee dedicated to fintech regulatory technology. The regulatory body says it has drafted a fresh regulatory framework which would make it possible for it to regulate wallets which are used majorly for payment services like the Libra project which will use the Calibra wallet.
The Australian Prudential Regulation Authority said proposals from the Council of Financial Regulators sent to the government relating to oversight of so-called “stored value facilities”, or digital wallets, will require services involving more than $50 million to be subject to "safeguarding and minimum capital" requirements, as well as "regular reporting requirements".
The APRA proposed Framework
“is intended not only to be fit for purpose for the current financial system but also be able to accommodate future developments and technological advances, such as proposals for Global Stablecoin eco-systems that have been the subject of significant attention in recent months.”
APRA says that virtual wallets play a crucially important part in the financial system thanks to the growing popularity of mobile applications and online purchases
“Some, but not all, digital wallets hold stored value on behalf of customers and are pre-paid facilities. Others (such as Apple Pay) hold customers’ credit/debit card details and only facilitate payments from that nominated account.”
However, the proposed regime is not likely to apply to another US tech giant, Apple, because its digital wallet, Apple Pay, merely stores a digital representation of bank-issued cards, and facilitates payments from nominated accounts where banks still hold funds as deposits.
The submission by APRA is a welcome move for Libra as it has faced lots of criticism and regulatory hurdles across the globe since the launch announcement last year. Australia’s central bank, the Reserve Bank of Australia (RBA) had once stated that Libra should never be allowed to roll on unless all the regulatory concerns are addressed and implemented.
Swiss regulators indicate that Libra could eventually gain approval
Facebook has said it would only launch Libra and Calibra if the system met regulatory requirements, and it was continuing to lobby governments to have it approved. The main jurisdiction regulating the Libra Association, of which Facebook is a member but does not control, is Switzerland.
At the end of December 2019, Switzerland’s then-president Ueli Maurer described Facebook’s Libra coin as a “failure”, saying that the digital currency wouldn’t have a chance at success in its current form.
However, an internal memo shared with Bloomberg shows that the Swiss government has now indicated that it would be open to working with Facebook to approve the Global Stablecoin.
The Swiss Confederation, led by Simonetta Sommaruga since the start of 2020, has noted that it remains open to projects which seek to reduce the costs of cross-border payments and increase financial inclusion.
Maurer had previously painted a bleak outlook for Libra’s future in the Alpine nation, claiming that the project had “failed” in its current form and explaining that regulators and central banks would never accept the basket of currencies backing the Global Stablecoin.
It now seems that these sentiments may have been the personal thoughts of Maurer rather than the wider Swiss government as regulators look for new ways to work with the tech giant.
Facebook Global Holdings had chosen Switzerland as a base for its Libra Network operations, registering the project as a blockchain payments firm in Geneva last May.
The project, which could potentially become the largest borderless payments system in the world by virtue of Facebook’s colossal user base, may generate significant employment and commerce opportunities in Geneva.
Bloomberg reported that despite a fresh look at Libra’s regulatory status, Facebook officials could not say for certain that the digital currency would be launching in 2020, with regulators still largely undecided on the digital currency’s fate.
Libra.org
The Regulatory Regime for Stablecoins
The Libra Association is pleased that the G7 Working Group report, ‘Investigating the Impact of Global Stablecoins (GSCs),’ recognises the potential to improve access to fast, secure and inexpensive payment technology.
The Libra Association is committed to building a system that replicates or exceeds current standards for consumer protection, financial stability, and global cooperation to prevent money laundering and illicit finance while preserving national sovereignty over monetary policy. The distributed governance of Libra is structured to provide more choice for consumers, greater access, higher interoperability and lower prices.
(Reference: Libra ‘The Regulatory Regime for Stablecoins’
(Reference: Senate Select Committee on Financial Technology and Regulatory Technology