The Australian has reported today that Australia's financial regulators are cooperating to force the Libra Association (mistakenly identified as "Facebook" by that newspaper) to divulge details about its plans for the Libra project. That article has already been parroted by other news outlets around the internet.
According to the Australian, this regulatory pushback has been prompted by Facebook's failure to reassure officials over the threat posed by the very idea of Libra to national security, banking, consumers and investors, while no software product has been released or described in detail.
The report strikes a sensationalist tone, alleging that eight Australian regulators (including ASIC, AUSTRAC, the ACCC, and the OAIC) have struck a "secret deal" to use "formal powers" to probe Libra. This assertion appears to be based on little more than fragments of documents obtained by The Australian which have been quoted without context.
It sounds alarming that ASIC’s emerging threat and harm committee met in July to discuss:
the potential disruption to Australian financial markets posed by the Libra crypto-asset and ecosystem
until readers understand that the emerging threat and harm committee's job is to discuss and identify potential harm in the marketplace. This recent speech by the Chair of the harm committee gives some more context (missing from the Australian report):
Our review and prioritisation of threats and harms is systematic and involves extensive internal consultation, draws on external experts, and involves the Commission itself. To give you an idea of the scale of this process, it almost spans the full year, kicking off in August and culminating in completion of final business plans in June the following year.
Commissioners at the July meeting were warned that an “inability to effectively supervise the Libra ecosystem” in order to maintain consumer confidence in financial markets, could affect “all regulated entities” and “all consumers (and) investors”.
Regulators need to look closely at any technology which offers regulated services to ensure those services are legally compliant and consumers are protected. However, Libra hasn’t released anything which could be properly analysed for compliance or non-compliance. In short there is no Libra ecosystem right now or details of what would be supervised, either effectively or not.
To accuse Libra of failing to "divulge details" or answer detailed questions about the compliance of software which hasn’t been built yet is both surprising and premature. When Libra products are released then they should of course be subject to proper scrutiny and consideration by all interested regulators.
Commenting on the report in the Australian to media, Michael Bacina, Partner at Piper Alderman (and co-author of this article) said:
Australian regulators are fiercely technologically neutral and put in great effort, often on their own time, to engage with and understand innovative projects in the Fintech and Blockchain space.
Questions about the regulatory framework that might apply to Libra could be raised in the Senate Inquiry, once there is something released by Libra or Calibra which can be analysed.
Nick Giurietto, Chief Executive Officer and Managing Director at Blockchain Australia made the following comments in response to the Australian article:
Project Libra outlines a potentially transformative approach to payments systems. The use of distributed ledger technology could increase the speed and security of payments while reducing costs – especially across international borders. Like any significant innovation, there are risks that need to be understood and managed.
Importantly, DLT along with so-called smart contracts makes possible the development of compliant by design processes that should be at least equal to current regulatory requirements. Discussions with regulators to satisfy them that new approaches can meet regulatory obligations is a routine part of any project of this scale.
Obviously, Blockchain Australia has not been involved in these discussions, but we have found Australian regulators to be supportive of innovation while still firmly focussed on ensuring that consumer protection and other regulatory standards are fully satisfied.
Further reporting will be expected on the Libra project, particularly given the hostile reception that the US Congress and US Senate have provided. Time will tell whether the products delivered meet the promises of Libra, or whether the warning bells being so furiously rung have some truth to them.