CFTC Chairman: Facebook's Crypto Project Design Is 'Very Clever', But Only in Early Stages

Social media giant Facebook has been discussing the details regarding the development of its stablecoin  - GlobalCoin - with the U.S. Commodity and Futures Trading Commission (CFTC).

CFTC Chairman Christopher Giancarlo revealed that the US federal regulator has held “very early stages of conversations” with Facebook’s management. According to Giancarlo, the recent discussions with the social media giant have been centered around gaining a better understanding of what type of cryptoasset Facebook intends to release.

Does Facebook’s Stablecoin Fall Under CFTC’s Remit?

According to the Financial Times, the CFTC is looking to determine whether Facebook’s stablecoin would be considered a traditional financial instrument (and regulated as such) under the current regulatory framework.

Commenting on the matter, Giancarlo said the CFTC was “very interested” in gaining a better understanding of the new cryptocurrency and that the regulator would strictly “act on an application.” He also clarified that Facebook had not provided any details (in writing) to the CFTC regarding the upcoming launch of GlobalCoin.

Mainly Used For Cross-Border Transfers and Online Payments

Notably, Facebook’s management has also held discussions recently with other government agencies and officials in the U.S. and the U.K.. The conversations have reportedly been focused on the social media company’s plans to introduce GlobalCoin, a distributed ledger technology (DLT)-enabled stablecoin.

As confirmed by Facebook in previous reports, the firm’s new crypto token will mainly be used to make cross-border payments and settle e-commerce transactions. The social media giant’s cryptocurrency is also part of its blockchain-focused initiative, called Project Libra.

Facebook Reportedly Seeking $1 Billion in Investments for Crypto Project

While it’s too early to categorize Facebook’s GlobalCoin as a particular type of financial instrument that would be regulated by the CFTC, Giancarlo noted that if the social media giant’s stablecoin is backed by the USD, then it might not be necessary to tie the coin to derivatives.

Acknowledging that the overall design of Facebook’s latest stablecoin initiative is “very clever”, Giancarlo also mentioned in the report that the main compliance issues the project may face would be centered around whether there would be appropriate know-your-customer (KYC) / anti-money laundering (AML) checks.

In early April 2019, Nathaniel Popper, the author of Digital Gold, one of the most popular books on bitcoin (BTC), revealed that Facebook was planning to raise $1 billion for its cryptocurrency project. Popper, a New York Times reporter and Harvard University graduate, also noted in April that “one of the biggest allures of blockchain projects is the decentralization.”

Although Facebook might not need to conduct a fundraising campaign, as it has around $100 billion in total assets and $84 billion in equity, analysts have argued that the firm’s management may be planning to work with outside investors in order to make its crypto project look “more decentralized and less controlled” by the company itself.