Facebook’s Libra: A case for capital markets supervision?

Abstract: This paper considers some of the seemingly simple questions that people have been asking about Facebook’s Libra, with particular regard to its legal nature. As this paper will show, thanks to the way Libra is structured, it falls under various aspects of European capital markets law. The paper argues that the Libra Association and its resellers will most likely be required to operate properly licensed branch(es) or registered office(s) in the EU. Otherwise, they would not be allowed to market and operate their network on the EU single market. Libra is a complex product combining the functions of traditionally separate product types (namely payment instruments and funds/financial instruments). In this way, it embodies the very risks that capital market regulation seeks to control and mitigate shrouding these risks in an innovative and exciting technical guise does not change this fact.

Keywords: blockchain, crypto-assets, Libra, Facebook, virtual currencies, capital markets law

Ralph Rirsch is a supervisor at the Austrian Financial Market Authority’s Department for Integrated Conduct Supervision of Banks. He specialises in new technologies and regulation relating to packaged retail investment and insurance-based products (PRIIPs). He has also worked as a consultant in the banking sector with a focus on regulatory issues, large-scale IT implementations and database management, and as a systemic consultant for small and medium- sized enterprises, with a specialism in group dynamics. His academic background is in law (University of Vienna) and international business administration (Vienna University of Economics and Business).

Stefan Tomanek is a legal expert in the Department for Prudential Supervision Asset Management, Prospectus, Consumer Information at the Austrian Financial Market Authority. Although his work focuses on the supervision of undertakings for collective investment in transferable securities and alternative investment funds, he is heavily involved in the area of crypto-assets and related business models. In this context he is also a delegate to various international committees, including those convened by the European Securities and Markets Authority. He holds a master’s degree in law from the University of Vienna as well as a master’s degree in business administration from the Danube University Krems.