Since announcing its plans to launch a cryptocurrency, Facebook has met with stiff opposition. Namely from regulators concerned about the impact on consumers and the wider global financial system. In the meantime, the company is seeking a BitLicense from New York
In its bid to create a global cryptocurrency and payments infrastructure, Facebook has been attempting to work with individual regulators around the world. In New York, for instance, the company has this week applied for a BitLicense.
Notoriously difficult to secure, the BitLicense gives holders the authorization to operate a cryptocurrency business in New York. Crucially, the license demands strict compliance criteria. This is could pose a test for Facebook as it tries to win the backing of regulators in the state.
It comes amidst a clamor to respond from regulators worldwide. Many of whom are determined not to give Facebook a “free pass”.
As a result of their chosen strategy of embracing regulation, there is now the expectation that Facebook will seek approval from hundreds, perhaps even thousands of regulators worldwide.
The application for a BitLicense will see Facebook begin compliance work according to requirements in the state of New York. New York’s requirements are among the most stringent of any US jurisdiction.
A spokesperson for Facebook said the scrutiny of regulators was something the firm was intentionally courting at an early stage of the process. The cited reason being in order to gather feedback and develop its business.
“The scrutiny that we’ve seen is something that we expected and welcome. We announced this early by design in order to have this discourse in the open and gather feedback.”
The regulatory discussions center around Facebook’s plans for a stablecoin, known as Libra. Unlike cryptocurrencies like bitcoin, which fluctuate in price according to demand, Facebook is planning to peg Libra at a fixed value.
Like other stablecoins, this will allow Libra to be used as a proxy for fiat payments. Naturally, these won’t expose parties to exchange risks.
Facebook are planning to launch the project in 2020. Moreover, with thousands of licenses to apply for internationally, it looks like the social media giant has its work cut out to meet the deadline.
Nevertheless, the project could introduce hundreds of millions of Facebook users to cryptocurrency payments and technology for the first time.