This article is written by Kabir Hastir Kumar, pursuing a Diploma in Cyber Law, FinTech Regulations and Technology Contracts from LawSikho.
The current pandemic has profusely accelerated the paradigm shift to a wholly digital payment mode. Digital payment systems have now become ubiquitous due to the rampant fear of viral transmission through conventional paper currency. As financial technology continues to develop at a prolific rate, it is reasonable to presume that blockchain will play a pivotal role in the realisation of bleeding edge solutions. Many countries have accommodated, or are continuing to accommodate, blockchain based assets such as Digital Securities and Virtual Assets into their existing legal and regulatory environments. Additionally, many countries, including India, have publicly disclosed their intention of using blockchain to launch a Central Bank Digital Currency (CBDC). This concerted effort can be attributed to the recognition of the very apparent benefits of deploying blockchain technology in the financial ecosystem. The following article analyses Facebook’s attempt at leveraging the power of blockchain to launch its latest stablecoin ‘Diem’ (Previously called libra).
What are Stablecoins
Before we place Diem under the lens for analysis, it is necessary to gain a rudimentary understanding about stablecoins. A stablecoin can be defined as a cryptocurrency that aims to maintain a stable value relative to a specified asset, or a pool or basket of assets. Stablecoins may serve as an alternate store of value or as a new payment method. It can also be used to secure revenue streams generated from crypto-assets in less volatile instruments (crypto-accessory function). Since Diem seeks to act as a contemporary payment method, the article will analyze stablecoins as such.
Characteristics and Benefits
While cryptocurrencies have not evolved into viable proxies for centralized and sovereign monetary arrangements, stablecoins present several advantages over both cryptocurrencies and existing modes of digital payments:
Advantages over Conventional Bank-Based Ecosystem
Stablecoin arrangements are conceptually similar to existing and conventional stores of value such as stored value cards, money market funds, mobile money and e-money. However, by using blockchain technology, they are poised to disrupt the financial ecosystem in totality by enabling cheaper, easier, speedier, anonymous and peer-to-peer payments. At the outset, they are token-based, i.e. their validity is verified based on the token, itself, rather than the identity of the counterpart (as is the case for account-based payments), thereby making the process of validating transactions less cumbersome. Payments can be made and settled bilaterally with no need to find a chain of interlinked intermediary balance sheets, regardless of the geographic proximity of the sender and receiver. This phenomenon of disintermediation results in direct payments between buyer and seller, cutting down on costs for both merchants and consumers. It also results in instant settlement in case of cross border payments, which would otherwise take days. It may also be possible to programme payments (through smart contracts) in such a way as to support atomic settlement (immediate “delivery-vs-payment”) and to allow for very small values (micropayments). Smart contracts could additionally enable automation of certain transactions, for example: only transferring the funds for a house purchase once an inspection report has been received and confirmed. The trigger of payment in such a case would be contingent upon the fulfilment of certain objective requirements (conditions precedent). The use of blockchain technology coupled with APIs and smart contracts may also lead to embedded and automated supervision, where data would be automatically provided as a licensing or registration requirement to achieve supervisory and regulatory objectives, thereby making compliance an easier and cheaper task.
Advantages over Cryptocurrencies
The initial wave of cryptocurrencies has so far failed to provide a reliable and attractive means of payment or store of value. They have suffered from highly volatile prices, limits to scalability, complicated user interfaces, lack of integration mechanisms for retail purposes, and issues in governance and regulation, among other challenges. Hence, cryptocurrencies have primarily served more as a highly speculative asset class for investors as opposed to a viable method of making payments. Due to this very characteristic (price volatility), exchanging cryptocurrencies back into fiat currencies may also trigger a taxable event in many jurisdictions. By using price stabilisation tools (discussed in latter portion of article) and by creating an inclusive API infrastructure for both financial and non-financial services (for example: integration with e-commerce platforms), the aforementioned problems can be overcome. The Diem Association has created a separate portal for developers, consisting of all the necessary APIs and SDKs required to facilitate merchant and wallet integration, inevitably improving financial inclusion. In my opinion, such readily available documentation will allow service providers to create user friendly front-end interfaces.
Taxonomy and Stabilising Tools
All-in-all, it can be said that stablecoins present the advantages of cryptocurrency without the worries of volatility. Such level of stability can be achieved by utilizing stabilising arrangements or tools. Stablecoins can be classified into three types on the basis of stabilising mechanisms used to reduce or eliminate fluctuations in price:
Off-Chain Collateralized Stablecoins
This is the simplest and most common model for stablecoins. Here, the stablecoin is ‘backed’ by an asset, commodity or fiat currency. The stablecoins are a digital representation of the assets and funds which collateralize them and represent a claim over the same. They have many parallels with e-money and act as an effective means to make payments and to store value. Off-chain collateralised stablecoins necessitate an accountable issuer that is responsible for safekeeping of the collateral, either directly or through a custody agreement with a third-party, and can therefore be held to account for satisfying holders’ rights. This marks a clear departure from a prominent characteristic of cryptocurrency, which is the lack of propriety right against, financial claim on, and liability of an identifiable entity.
On-Chain Collateralized Stablecoins
Under this model, the collateral backing of stablecoin is a cryptocurrency held directly on the blockchain. Unlike off-chain collateralized stablecoins, there is no reliance on a centralized entity to safeguard and control issuance. However, maintaining price stability is a more incommodious task due to volatility in prices of collateral, and may also require overcollateralization to adapt to the same.
Algorithmic Stablecoins/ Non-Collateralized Stablecoins
Non-collateralized stablecoins use algorithmic mechanisms to control the issue of stablecoins, resulting in the artificial maintenance of price through regulation of supply. When the price increases, supply is increased and when the price falls, supply is decreased. The algorithm is embedded in a smart contract and is continuously supplied with data on supply and demand from various trading platforms.
History of Libra and advent of Diem
Libra was a blockchain based payment ecosystem, spearheaded by Facebook, with the objective of issuing a global digital currency collateralized by fiat currency equivalents such as euros and the US Dollar. Due to regulatory pressures, apprehensiveness and criticism, the Libra project went through several iterations and hence the history can be segmented as follows:
The first rendition of the Libra White Paper, released in June of 2019, proposed an off-chain collateralized global stablecoin which would be backed by a basket of sovereign currencies such as the British Pound, Euro, U.S. dollar, and the Japanese yen. The main vision was to create a global financial system which was cheaper, more accessible, and more connected as opposed to conventional payment systems by launching a “simple global currency”. It would be governed by the Libra Association, a new non-profit entity to be incorporated in Switzerland. The choice of nation was specific, as Switzerland boasts a relatively robust regulatory framework pertaining to financial innovation. The proposed ecosystem consisted of 3 important components.
The Libra Blockchain, relied upon a decentralized and cryptographically authenticated ledger. The foundation of the system would have been managed throughout by a pool of validators, assigned with the duty of verifying transactions and agreeing upon accepted versions of the ledger using the Byzantine by Fault consensus protocol. The blockchain was slated to be a “permission-based” system (there would be a central administrator) with the promise of transitioning into a “permission-less” system (anyone can be part of the network) within 5 years. This decision of subsequently shifting to a permission-less system, was met by the staunch criticism of various regulators. This was mainly because it would be difficult to implement compliance mechanisms on a permission-less system, where anybody could become a validator.
The sovereign currencies paid by users to obtain Libra would have been held in a reserve. The accumulated funds were to be invested in high quality, short-term assets. Any interest on such investments would have been used to pay operational expenses and profits to the Association members. The Libra Reserve was posited as a “buyer of last resort”, i.e. it would be used to facilitate redemption of the stablecoins for its underlying fiat currencies by the Libra Association. The whitepaper did not disclose how the funds would be invested however; which eventually attracted adverse public judgement and condemnation. The ambiguity resulted in concerns regarding the risk of investment losses, liquidity problems and runs.
The Libra Association was an independent non-profit organization of companies from different industries with strategically distributed locations. The association was designed to facilitate the operation of the Libra Blockchain; to coordinate the agreements amongst its stakeholders — the network’s validator nodes — in their pursuit to promote, develop, and expand the network, and to manage the reserve. They were tasked with the management of the Libra Reserve. It was the sole entity with the power of creating (minting) and destroying (burning) Libra coins. The Association was supposed to be governed by the Libra Association Council, which consisted of one representative member per validator node. Operational and policy changes could only be effectuated if certain voting thresholds were met. The association and its governance structure were purposefully created to distance Facebook from Libra. However, when confronted with concerns regarding commercialization of payment system data and overall monopolization of the payment ecosystem, Facebook’s plea, that they did not have substantial control over the system’s policies and practices, fell on deaf ears.
The proposed payment system was subjected to harsh scrutiny by regulators and politicians. Apart from the concerns highlighted above, regulators were mainly worried about the negative connotations the launch of such a stablecoin could have on the current financial system and how it may threaten the monetary sovereignty of states. They feared that the advent of a global digital currency, primarily governed by private entities, could expropriate some power from the Central Banks, who are the solely entitled entities to use money creation as a way to influence and protect the markets. The project was also criticized, by the Financial Action Task Force (hereinafter referred to as FATF), for its potential to be used as a tool for funding illicit activities and money laundering, in the absence of a holistic compliance framework.
The basket approach also had negative implications for potential Libra coin holders. It would be difficult to maintain stability of the basket’s value due to constantly changing relative weights of currency. This would affect the redemption value of the digital coin itself. This phenomenon, along with the treatment of stablecoins as property by various tax authorities around the world (such as the IRS), would mean that a purchase made using Libra would give rise to a taxable event. This is because the purchase would be treated as an exchange of property. If there was a difference in value of Libra between the date of acquisition and date of disposal it would trigger reporting and a possible tax liability (or tax loss), unless tax authorities were to exclude reporting for a de minimis change in value. The volatility of the basket value and similarity of stablecoins to cryptocurrencies and other digital assets also caused a lot of confusion and led to some regulators characterizing Libra as a security (i.e. a certificate or other financial instrument that has a monetary value and is capable of being traded), which if made official would increase the level of regulatory scrutiny.
The abovementioned regulatory and political backlash eventually forced the Libra Association and Facebook to take a more pragmatic stratagem which would address many of the above mentioned concerns. Consequently, the Libra Association released its second Whitepaper in April, 2020. Provided below is a list of key changes which were proposed:
- Single Currency Stablecoins and Libra as a Platform: Adjusting its ambitions for a “simple global currency”, the Libra association had now set eyes on creating a “simple global payment system”. The Libra Association backpedalled on their plans to launch a global stablecoin mainly to address the concerns regarding monetary sovereignty, the usurpation of power from central banks and volatility in value of underlying basket. The Libra payment system will now support a series of single-currency stablecoins for local jurisdictions that are collateralized by one currency, instead of a basket of fiat currencies. For Example: Libra Dollar will be backed by US Dollar and its cash equivalents or short term government securities denominated in the US Dollar. This significantly waters down the Association’s initial plan of releasing a global currency, and potentially displacing major sovereign currencies around the world. The Whitepaper also makes a promise to accommodate CBDCs once they become available, which in my view marks their intention of fostering financial innovation by centralized entities as well. The Libra Association also has clarified their intention of taking a collaborative approach for further development of their payment ecosystem: “We hope to work with regulators, central banks, and financial institutions around the world to expand the number of single-currency stablecoins available on the Libra network over time and to explore the technical, operational, and legal requirements to access direct custody with them.” In essence, the new payment system will act as another Paypal albeit with a significantly different technological backbone. This effectively addresses many concerns regarding hindrance caused to monetary policies of central banks and relevant financial institutions.
- Multi-Currency Stablecoin with Indirect Basket Approach: The Libra Association also intends to launch a multiple currency Libra Coin, comparable to the special drawing rights (SDR) issued by the International Monetary Fund (IMF). The multi-currency coin can be used to efficiently settle cross border payments and will also serve as a low volatile option in countries that do not have single-currency Libra coins. Unlike the previous rendition of the multicurrency stablecoin, this iteration will be a digital composite of existing single currency Libra coins, which are in turn backed by their respective baskets. The paper states that it “can be implemented as a smart contract that aggregates single-currency stablecoins using fixed nominal weights (e.g., ≋USD 0.50, ≋EUR 0.18, ≋GBP 0.11, etc.)”. This effectively addresses the worries of regulators pertaining to monetary sovereignty and control over monetary policy, since the value of the coin will be tied to value controlled by governments and central banks. Furthermore, the Association openly welcomes oversight and control of the basket and nominal weights by a group of regulators and central banks or an international organization (e.g., IMF).
- Compliance Framework: The Libra Association in its whitepaper acknowledges some of the regulatory perturbation surrounding money laundering and funding of illicit activities. Measures undertaken by the Libra Association in this regard will be discussed in a later portion (Regulatory Challenges) of the article.
- Details about Libra Reserve: The Association eliminates much of the previously present ambiguity regarding the composition of the Libra Reserve via its revised whitepaper. The Reserve will consist of at least 80% very short-term (up to three months’ remaining maturity) government securities issued by sovereigns that have very low credit risk (e.g., A+ rating from S&P and A1 from Moody’s, or higher) and whose securities trade in highly liquid secondary markets. The remaining 20 percent will be held in cash, with overnight sweeps into money market funds that invest in short-term (up to one year’s remaining maturity) government securities with the same risk and liquidity profiles.
- Abandonment of the Permissionless Promise: The whitepaper declares that the Association no longer aspires to create a completely permission less blockchain system. They have laid down a proper due diligence process for all members and validators.
Rebranding as Diem
The Libra Association has now rebranded itself as the Diem Association, in a bid to demonstrate ‘organizational independence’. The mechanics and components of Libra 2.0 still prevail, and the move has been seen by many as an attempt to eliminate any ties to Libra 1.0, which received unpropitious reception. The association is trying to distance itself from the regulatory pushback it received last year.
Regulatoty challenged and considerations for the Diem Association
Stablecoins, such as Diem, present a myriad of potential regulatory challenges and risks including legal certainty, anti-money laundering and countering the financing of terrorism (AML/CFT) compliance, consumer/investor protection, operational resilience and data protection.
Lack of clear regulatory classification in many jurisdictions
The most common approach taken by regulatory authorities with regard to the regulation of crypto-assets is to identify the activity performed by them and the participants involved, and to apply the relevant existing regulation to that activity or entity according to the “same business, same risks, same rules” principle. However, many have argued that a stablecoin arrangement could fall under a number of regulatory frameworks. This may result, in the absence of official clarifications, in regulatory overlap, which can inflict real costs on the Diem Association through repetitive and burdensome inspections and data collection efforts. For Example: In India:
- Facilitation of payment and remittances by stablecoin service providers would mean that Payment and Settlement Systems Act 2007 (the PSS Act) would apply.
- The asset management and risk-bearing functions (Reserves), may qualify as a money market mutual fund and may attract provisions of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996. (IOSCO in their public report have pointed out that an off-chain collateralized stablecoin arrangement shares a lot of similarities with a money market fund).
- May also be regarded as a deposit, so regulations under Companies Act and the Companies (Acceptance of Deposits) Rules 2014 (Deposits Rules) may apply.
In FSB’s survey, it has been reported that many jurisdictions are currently planning to provide clarification on how existing regimes apply to stablecoins and their providers while others are currently developing new and specific legislation. Until such nations disclose the regulatory requirements of issuing and operating stablecoins in their respective jurisdictions, the Diem Association cannot launch their services in the same (compliance will be impossible due to regulatory ambiguity/regulatory overlap). This may impede their launch of the Multicurrency coin, which would operate in multiple nations. Additionally, the differential classification of stablecoins across jurisdictions and lack of consonance in this regard would mean that the Diem Association would be required to comply with a huge variety of differing obligations. It may also lead to regulatory arbitrage due to misaligned national incentives and regulatory gaps.
Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT)
A bulk of the regulatory scrutiny received by Libra in the past was focussed on AML and CTF compliance. Regulators from around the world have frequently expressed their fears of the negative effects crypto-asset services may have pertinent to money laundering and terrorism financing. In October 2019, the G20 asked the FATF to consider the AML/CFT issues related to so-called stablecoins. Consequently, on July 7th, 2020 the FATF published a report highlighting the problematic characteristics of stablecoins; explaining how its revised standards apply to them; and identifying potential areas of enhancement for the effective implementation of AML/CTF measures.
At the outset, the FATF has stated that the materialization of risks will mainly depend on the type of stablecoin arrangement deployed by the issuers. However, the task force have mentioned a few common risks which pertain to the technology used to issue and maintain stablecoins:
- Anonymity: Anonymity is a major concern for the FATF, especially in the context of permission less blockchain systems, where there is an absence of a central administrator to monitor transactions. Additionally, it is customary on public blockchains to obfuscate the identity of the transacting parties by deploying dual cryptographic systems to preserve the privacy of individuals. However in the context of Diem, since it is now a permissioned system with a central administrator in place (Diem Association), the risk of anonymity is not likely to transpire, provided legal mandates such as KYC are imposed on them.
- Global Reach: The risk of Global Reach and unclear responsibility for AML/CFT compliance and supervision/enforcement is the most relevant in the context of multi-currency stablecoins such as the Diem Coin. The report states that the ‘travel rule’, which mandates that authorized virtual asset providers obtain, hold and exchange information about the originators and beneficiaries, will have to be made mandatory in order to mitigate the risk of cross border payments.
- Layering and Chain Hopping: The quick exchange and trading of stablecoins amongst each other may lead to multiple layering of transactional history. This would make the process of tracking the origin of funds a complex task.
- Mass Adoption: The highly illiquid nature of current virtual assets due to price volatility and complexity of use is currently deterring the mass adoption of the same. However, with the advent of stablecoins, the entire purpose of which is to facilitate payments on a massive scale, could lead to mass adoption relatively quicker. The criminal’s ability to use virtual assets commensurate with the degree of liquidity and ease of exchange.
Application of Revised Standards
In June 2019, the FATF revised its Standards to explicitly apply AML/CFT requirements to virtual assets and their service providers. In the 2020 report, the FATF has provided detailed guidance on how the aforementioned standards will apply to stablecoins such as Diem. The FATF does not seek to regulate the technology that underlies virtual assets or VASP activities or software creators. According to the FATF, the participants of the stablecoin network can be bifurcated into Financial Institutions or Virtual Asset Service Providers (‘VASPs’). As set out in INR.15 of the Revised Standards (2019), the AML/CFT obligations on a VASP and a financial institution are largely the same, with specific qualifications in relation to customer due diligence and wire transfer requirements. The FATF further stipulates that the designation will be contingent upon the function of the participating body and national law. If the core and specific functions of the participating body fall within the definitions of a financial institution or VASP in accordance to national law, they will be an AML/CFT-obligated entity, and will have to abide by customer due diligence requirements. For example, a person exchanging a so-called stablecoin for fiat currency or a virtual asset through an exchange or a wallet provider, which is acting as a VASP, would undergo customer due diligence.
Diem’s Regulatory Framework Pertaining to AML/CFT Obligations
The Diem Association has mentioned in its whitepaper, a detailed discussion on how to comply with AML/CFT due diligence. According to the whitepaper, Libra Networks (a subsidiary of the Diem Association) will be primarily responsible for operating the payment system and also for minting and burning stablecoins. Furthermore, it specifies four distinct payment system operators, each with their own function:
- Designated Dealers: They will act as market makers, and will extend liquidity to consumer-facing products. They will be the sole entities entitled to buy and sell from the Libra Networks and will hence facilitate distribution to VASPs and wallets.
- Regulated VASPs: These are VASPs that are registered or licensed in a FATF member jurisdiction and are permitted to perform VASP activities under such license or registration.
- Certified VASPs: These are VASPs that are not regulated by any public authorities but are certified by the Diem Association (for countries which have not implemented FATF recommendations)
- Unhosted Wallets: These are those entities which provide custodial services for stablecoins, but are not affiliated to any VASP or Designated Dealers.
The Diem Association has stated that it will develop a compliance framework which will consist of AML/CFT/sanctions compliance policies and procedures based on a risk assessment and approved by the board of directors of the Association. Furthermore, it has been stated that the Association will conduct due diligence on all of the payment system participants mentioned above, and will check for AML/CTF compliance. Operational standards will also be laid down by the Association in this regard. Transaction and address balance limits will be imposed on all unhosted wallets and certain categories of VASPs. The Association also plan to deploy automated smart protocols for on-chain activity which will enforce certain compliance based requirements (for example: blocking of transactions involving blockchain addresses associated with sanctioned persons).
Despite the Associations dedicated approach to ensuring that AML/CTF obligations are met, it all boils down to each jurisdiction’s own regulations. An inconsistency in each nation’s regulatory framework would mean that automated compliance protocols embedded onto the system would be ineffective. Another problem would be to handle a vast number of different payment system participants, each belonging to different nations and each having their own set of operational mandates. For multi currency transactions, another problem comes up, “who decides who is on the “blacklist” for sanctions purposes?”.
Operational Resilience and Consumer/Investor Protection
In 2014, Mt. Gox in Japan (the largest crypto-exchange at the time) collapsed due to hackers attacking the network by gaining access to Mt. Gox’s private keys. In the hack, cryptocurrency worth $450 Million was syphoned off without a trace. With such risks involved, regulation is required to ensure that virtual asset service providers and financial institutions are both resilient to associated risks.
Operational resilience is defined as “the ability of firms, FMIs and the system as a whole to prevent, adapt and respond to, recover and learn from, operational disruption.” As is required of any technological development in the financial sector, additional work may be required to secure consumer and investor protection and to make sure that they are informed of all material risks and individual obligations. The entire system must also be resilient to cyber-attacks. The main purpose of operational resilience is to ensure prevent operational incidents from impacting consumers, financial markets and the overall financial system. There have been several recent developments in the field, with the latest being EU’s proposal for a Digital Operational Resilience Act (DORA). The rationale behind implementing such stringent requirements is to prevent incidents which may lead to systemic risks and financial instability. The proposal imposes several Information Communication Technology (ICT) risk management, testing and reporting requirements on a vast number of financial entities including crypto-asset service providers. The proposal also provides for a supervisory framework, wherein designated authorities will assess whether critical ICT third party service providers have in place comprehensive, sound and effective rules, procedures, mechanisms and arrangements to manage the ICT risks that it may pose to financial entities.
Similar strides are also being made in the APAC region with countries like Singapore and Hong Kong currently expanding their resilience frameworks. These set of operational requirements will impose significant costs on the Diem Association for ensuring compliance. Their vision of deploying a multi currency coin as well as deploying single currency coins in specific jurisdictions will require them to conduct extensive due diligence with regard to ICT service providers relied upon. Their on-boarding process for new Authorized Dealers, VASPs and Non Hosted Wallets will require them to scrutinize the ICT systems utilized by them to guarantee utmost resilience. The set of requirements imposed may also deter many players from becoming a payment system participant altogether, leading to poor scale.
After the Cambridge Analytica scandal, the general public have been apprehensive about Facebook’s data policies. Many have expressed their concerns regarding how the vast reserves of data collected by Diem and their partners will be processed and shared. The Diem Association has failed to provide details regarding information handling practises in their whitepaper. As mentioned earlier, there are several entities involved in the payment system described by the Association in its whitepaper, which will have to continuously share data with each other. Additionally, the deployment of stablecoins by Diem will eventually result in the rapid accumulation of ‘Financial Information’, which is treated as sensitive personal data in many jurisdictions, and the processing of which is subjected to additional safeguards. All of the abovementioned factors necessitate that the Diem Association, along with the participants of their payment system, have comprehensive data protection policies in place before launch. They will also have to incorporate mechanisms which enable users to exercise their data protection rights. A project of this scale, extending across several jurisdictions, will in all likeliness also have to deal with data localization requirements.
The facilitation of near instant cross border payments and atomic trading seemed to be a pipe dream nearly a decade ago. The next era of financial services is approaching at a rapid rate. Stablecoins such as Diem have posited themselves as the ‘next big thing’ in the payments industry. The arrival of such digital services has prompted many authorities to investigate the feasibility of launching a CBDC to further improve financial inclusion and to also increase the efficiency and speed of making payments. However, the current regulatory landscape surrounding virtual assets is still in its infancy. Ambiguity and uncertainty in this regard may further stall the Diem Association’s vision of a simple global payment system. Compliance work and due diligence will be an onerous task for the Association and may require massive amounts of capital. Until international consonance is reached and regulators are satisfied with the regulatory framework in place, the project may see a fractionalized launch, where the coins are issued in jurisdictions with concrete and crypto friendly regulations.
 A digital representation of a financial asset classes that happens to be a security and which is verified and recorded on Distributed Ledger Technology (DLT).
 A digital representation of value that can be digitally traded, or transferred, and can be used for payment or investment purposes.
 Financial Stability Board, Financial Stability Implications from Fintech: Supervisory and Regulatory Issues that merit authorities’ attention, Report to the G20 (2017).
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 Douglas Arner, Raphael Auer and Jon Frost, Stablecoins: Risks, Potential and Regulation, BIS Working Papers No 905 (2020).
 Charles M. Kahn, Caitlin Long , Manmohan Singh, Privacy Provision, Payment Latency, and Role of Collateral, IMF Working Paper WP/20/148 (2020).
 See, G30 Steering Committee, Digital Currencies And Stablecoins Risks, Opportunities, and Challenges Ahead, Report of G30 (2020).
 See Marco Di Maggio and Nicholas Platias, Is Stablecoin the Next Big Thing in E-Commerce?, HARVARD BUSINESS REVIEW (May 21st, 2020), hbr.org/2020/05/is-stablecoin-the-next-big-thing-in-e-commerce.
 A smart contract is a self-executing contract with the agreed terms being directly written into the code.
 Application Programming Interfaces enable data interactions between two separate applications.
 Douglas Amer, supra note 6.
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 The State of Stablecoins, BLOCKCHAIN.COM https://www.blockchain.com/ru/static/pdf/StablecoinsReportFinal.pdf.
 Governance body for Diem.
 Tracy Molino, “Part 2 – The Stablecoin Cryptocurrency System | JD Supra.” JD SUPRA (Dec. 1st, 2020), www.jdsupra.com/legalnews/part-2-the-stablecoin-cryptocurrency-78223/.
ECB Crypto-Assets Task Force, supra note 4.
 See, Ben Regnard-Weinrabe, Heenal Vasu, Allen & Overy UK LLP; and Hazem Danny Al Nakib, Sentinel Capital Group, Stablecoins, THE HARVARD LAW SCHOOL FORUM ON CORPORATE GOVERNANCE (Feb. 10th, 2020), corpgov.law.harvard.edu/2019/02/10/stablecoins/.
 Tracy Molino, supra note 18.
 See, Libra White Paper 1.0 (2019).
 Libra Association, “The Libra Association” (2019), p.1-2.
 See C.P Chandrasekhar, Dangers of ‘Libra’, FRONTLINE (Jul. 19th, 2020), frontline.thehindu.com/columns/C_P_Chandrasekhar/article28227211.ece.
 Ioannis Androutsos, Libra: Nuts and Bolts of Facebook’s stablecoin initiative, 25 DE JURE ELSA ATHENS 37 (2020).
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 The French Finance Minister publicly declared their intention to block the services of libra in France. See, Facebook’s Libra Should Be Blocked in Europe, France Says, BBC NEWS (Sept. 12th, 2019), www.bbc.com/news/business-49677146.
 J.P. Koning, Does Libra threaten monetary sovereignty?, AMERICAN INSTITUTE FOR ECONOMIC RESEARCH (Sept. 29th, 2019), https://www.aier.org/article/does-libra-threaten-monetarysovereignty/.
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Timothy G. Massad supra note 29.
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 See. Libra Whitepaper V2.0.
 Libra Whitepaper V2.0, Pg 11.
 Libra Whitepaper V2.0, at Pg 11.
 Ibid. Pg 11.
 Ibid. Pg. 11.
 Ibid. Pg. 12.
 Ibid. Pg. 12.
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 Participants include the governance bodies, exchanges, wallets, dealers, etc.
 Defined under Glossary of FATF Recommendations at Pg. 122.
 Id. at Pg. 130.
 Timothy G. Massad supra note 29.
 Yoshifumi Takemoto and Sophie Knight, Mt. Gox files for bankruptcy, hit with lawsuit, REUTERS (Feb. 28th, 2014), https://www.reuters.com/article/us-bitcoin-mtgox-bankruptcy/mt-gox-files-for-bankruptcy-hit-with-lawsuit-idUSBREA1R0FX20140228.
 Prudential Regulation Authority, Building the UK financial sector’s operational resilience, Consultation Paper 29/19.
 The view from the regulator on Operational Resilience, FCA (Dec. 5th, 2019), https://www.fca.org.uk/news/speeches/view-regulator-operational-resilience (last visited Dec 20, 2020).
 Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on digital operational resilience for the financial sector (DORA) COM/2020/595 final.
 Dan Swinhoe, EU’s DORA regulation explained: New risk management requirements for financial firms, CSO ONLINE (Nov. 19th, 2020), https://www.csoonline.com/article/3596881/eus-dora-regulation-explained-new-risk-management-requirements-for-financial-firms.html.
See, SECTION II, CHAPTER V.
 See. Monetary Authority of Singapore consultation papers, “Proposed Revisions to Guidelines on Business Continuity Management” and “Technology Risk Management Guidelines.”
 See. Hong Kong Monetary Authority’s (HKMA) Cybersecurity Fortification Initiative 2.0.
Stephen White, More details needed over Facebook Libra data security, PRIVSEC REPORT (Aug. 6th, 2019) https://gdpr.report/news/2019/08/06/more-details-needed-over-facebook-libra-data-security/.
 Codruta Boar, Henry Holden & Amber Wadsworth, Impending Arrival – A Sequel to the Survey on Central Bank Digital Currency, BIS Papers No 107.
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