Facebook Discusses Crypto Stablecoin Project With CFTC

News, Regulation | June 3, 2019 By:

Social media giant Facebook has started a discussion with the US Commodity and Futures Trading Commission (CFTC) about the future of its cryptocurrency project.

The Financial Times, citing CFTC chairman Christopher Giancarlo, reported that the regulator is in the early stages of talks with Facebook in an effort to understand whether the social media giant’s crypto stablecoin initiative would fall under the CFTC’s scope.

“We’re very interested in understanding it better,” Giancarlo said. “We can only act on an application, we don’t have anything in front of us.”

The stablecoin, which will reportedly be called “GlobalCoin,” will be pegged to a basket of different foreign currencies and make it easy for users to send money to each other and make online payments.

If GlobalCoin is traded via futures contracts or another derivative, it will fall under the CFTC’s purview since the regulator has authority over futures and derivatives. However, if the the social media giant’s crypto stablecoin is traded exclusively via cash-based markets, it will not fall under the CFTC’s regulatory remit.

Giancarlo explained that if the stablecoin could be backed by the US dollar, then there might be less of a need for derivatives tied to it.

“That’s very clever,” Giancarlo said, although he said that some “basis risk” may still exist, referring to a situation where the price of an underlying instrument does not move in perfect sync with its derivative. The regulator is also concerned how Facebook will adhere to and implement the anti-money laundering and know-your-customer measures.