The chief securities regulator of Hong Kong says there needs to be united response on Facebook’s Libra from the world regulators in order to tackle the “real risk of regulatory arbitrage.”
Ashley Alder delivered remarks on Wednesday at the Hong Kong Fintech week. Being the chief executive officer of the Hong Kong and Futures Commission (SFC), said that Libra and other “Big Tech” stablecoin projects pose a huge threat to the fragmented financial regulators globally.
“The risk comes not when countries shore up their domestic anti-money laundering and consumer protection laws, but when some do, and others don’t,” said Alder.
Alder explained the “arbitrage” threat saying, when companies flee stricter jurisdictions for nations that have more lax regulations.
“If a retail stablecoin is approved in one jurisdiction, whether as a security, payment system, fund, trading platform or another category (or a combination of these), it could easily go global very quickly if it rides on the back of the huge user-base of a Big Tech platform.”
Alder did acknowledge that the explosion of Libra into the consciousness of the public has brought about added scrutiny around the area.
Without a doubt, the recent pressure from the U.S, the Chinese and the EU regulators is the one that triggered the hemorrhage among the governing council of the project. Several companies have exited the project even before the formal creation of the Libra Association.
Alder said that regardless of the performance of Libra or if launches, its existence has made the crypto to get much regulatory attention.
“In 2018, the crypto world was seen to be of marginal importance to the global financial system. The Financial Stability Board, which is basically the G20’s financial regulatory arm, concluded last year that, although blockchain ‘currencies’ such as Bitcoin were problematic from an investor protection angle, they did not yet pose any significant financial stability risks,” he said. “But then came Facebook’s Libra, and the international regulatory community had to get its act together very rapidly.”
“But, regardless of its future prospects, the Libra project has galvanized regulators across the world to look far harder at the opportunities and risks inherent in virtual assets.”
The remarks of Alder at the Fintech conference also presaged the SFC’s updated regulatory framework release for the cryptocurrency exchanges.