This week, it was revealed that the Libra Association would be pursuing a payment system license under the Swiss Financial Market Supervisory Authority (FINMA) to clarify the regulatory status of the Libra Coin. Ahead of this, I spoke to top global payment lawyer Robert Courtneidge about why the world’s companies should embrace Libras stablecoin.
Courtneidge highlights that the future of payments will be shaped by what has been occuring in the blockchain space and the way in which new coins are being created. “The emergence of cryptocurrencies reminded me of how the prepaid industry started where money laundering was rife. Then, cryptocurrencies came to the fore and took some of the bad publicity away from electronic money, but this was due to misknowledge and rumor more than anything else.
“However, there is also a lot of truth in this. Like many things, a very small amount of dirt can damage a very large, potentially good industry. It’s always easier to point the finger than to say something is a good solution.” Courtneidge adds that he has long been aware of the potential of a new era of coins in which neutrality will facilitate international banking and international payments in a way that transforms the current system, removing the frictions that make them clunky to work with.
For those who are not aware - following months of speculation, Facebook stifled rumors by announcing a digital currency called Libra that would allow the platform’s global users to make financial transactions online and in turn, threaten banking as we know it today. The currency is serviced by a consortium of companies referred to as the Libra Association, an independent, non-profit organization based in Geneva, Switzerland and operates to validate transactions on the Libra blockchain and manages the reserve.
Companies such as Visa, Mastercard, PayPal, Uber, Lyft and Spotify are also part of this consortium. Courtneidge has been having discussions with central banks about what he refers to as an ‘intermediate currency’ years before Facebook’s announcement. He explains that “a currency that could be used to transmute between fiat currencies issued by central banks on the blockchain was considered.
It could be used in the same way that the Bank of England has a sterling settlement system.” A global settlement system would allow this transmutation to occur, but a concern exists around the fact that governments would lose control of their own currencies. This is where the Libra stablecoin can play a part.
“This is the next stage on the route of trying to create something that is in many ways neutral to countries, neutral to governments and neutral to banks.” Courtneidge says that while these entities cannot control the coin, Libra provides a transparent and immutable way of moving value - “if it’s done properly.
.” While Libra was initially funded and created by Facebook, he goes on to say that the entire consortium is responsible for the upkeep and upgrading of the system......