NEW YORK/SAN FRANCISCO(Reuters) – Facebook Inc’s (FB.(O), is confronted with the unprecedented pressure on the digital currency, which is the social media company hopes it will be widely recognized as a legal means of payment within a year.
FILE IMAGE: Representations of virtual currency are to be displayed on the front of the monitor the logo in this illustration picture the 21 of June, 2019 at the latest. REUTERS/dado Ruvic/Image/File Photo
Ever since Facebook unveiled its cryptocurrency, called a Scale, of 10 days ago, Reuters spoke to more than a dozen years of experience in the financial regulations, financial technology, payments and cryptocurrency. Some of the expected government the light to go on.
The company’s announcement was met with an immediate response from U.S. lawmakers and regulators all over the world, who are concerned that Facebook is too massive, and are careless with the privacy of our users.
Randal Quarles, the president of the Council for Financial Stability, co-ordination of the financial regulations for the G20 countries, warned this week that a broader use of crypto-equipment for retail payments needs to close the overall assessment by the regulatory authorities. Cryptocurrencies such as bitcoin will always be one of the least-regulated areas of finance.
“It has been a complete disaster from a legal perspective,” said Barry Lynn, executive director of the competition, the group will Open the Markets of the Institute. “This is a company that has had fires all over the world, with the regulatory authorities. It’s only going to get worse.”
The plan is for the Scale, keep the record of the customer’s deposits and investing them in government bonds, the traditional currency of the assets, and the provision of cross-border services and trade in the new currency, it will require a commitment by the central banks, financial supervisory authorities and enforcement authorities around the world.
The Facebook subsidiary was established in order to Scale operations, called the Calibra, it has been applied for the funds, the transfer of the license in the United States of america and is registered with the U.S. Financial Crimes and Enforcement Network’s (FinCEN) as a money service, a spokesman said.
It has also applied for a license to operate a cryptocurrency business in the New York state Department of Financial Services, a person familiar with the matter said. The representatives of the united kingdom Financial Conduct Authority (fsa), the Bank of England, Switzerland, and the financial supervisory authority FINMA also said that Facebook has been in touch.
“The research that we have seen, it is not something that we expected, and welcome,” a Facebook spokesperson said. “We announced it at the beginning of the design to have this discussion out in the open and to gather feedback.”
The Reserves will be subject to the monetary policies of the countries in which the funds are established, the spokesman said. Calibra’s are not going to apply for it in the local bank licences, he added.
Facebook was also a Geneva-based non-profit organisation to manage the new currency and keep reserves, in addition to a number of key partners.
They are going to launch in the first half of the 2020s, with the intention to eventually offer a wide range of financial services such as loans.
“They don’t get a free pass to go somewhere,” said Sean Park, Founder and Chief Investment Officer of Anthemis, a venture capital firm that backed digital businesses in the financial services industry. “And, since their intent is to be global, they will be literally hundreds, if not thousands of licenses from hundreds of different regulators all over the world.”
In addition to the central banks, the markets, and of regulatory authorities (nras) for the protection of the consumer in charge, and agencies that deal with the cases of money laundering, tax evasion and other financial crimes, Facebook, payment network, to comply with the Principles for Financial market infrastructures established by the Bank for International settlements and the International Organization of securities commissions.
Also, there are privacy and anti-trust regulators around the world, with whom Facebook’s already fighting all the time.
“Just in terms of the new supervisory architecture in action, it’s a whole new ball game,” said Jeff Bandman, a former U.S. Commodity Futures Trading Commission official who now runs the fintech regulatory consulting Bandman Coverage. “One year is enough time for you to meet with the supervisors to find out where the real bottlenecks are, and the potential for a scale with higher resolution.”
However, it has been a challenge, but Facebook seems to be willing to take, given the potential payoff, with its 2.4 billion users, and with the prospect of replicating the success of the Chinese social networks like WeChat, which has grown profits by offering a range of financial services to the applications.
RBC analysts have described the Scale as a “potential watershed moment” for Facebook in terms of revenue and user engagement.
However, the costs could be substantial for the income to start rolling in. It Is necessary to set up an internal compliance framework, staff on the screen, in transactions for illegal activity, and to verify the customer’s identity.
The money-transfer giant the Western Union Co. (WU.(N), for example, has spent over $1 billion, in line, in the past five years, a spokesman said.
Western Union is registered with FinCen, and is governed by the U.S. Bank Secrecy Act, are licensed in 49 states and Washington, D. C., and in the three regions of the united states. It has licenses in more than 30 countries, reporting more than 54.
“I would have to say that the risks are commensurate with the return potential is enormous”, says Pascal Bouvier, is the managing partner in the middle game Accounts for a financial technology venture capital firm.
Reporting by Anna Irrera, New York, and the two take an instant dislike to Paul, is in San Francisco; Editing by Lauren Tara LaCapra and Susan Thomas