How Anti-Money-Laundering Rules Hinder Libra's Mission to Reach the Unbanked

The Libra Association is thinking of radical approaches to reach the unbanked in certain locations, including a "Step-ladder" approach to know-your-customer regulations.

The Financial Action Task Force said it is open to working with Libra about potentially building new forms of digital identity.

The organization leading the development of Facebook's Libra stablecoin is assembling a range of approaches for connecting unbanked people around the world to the proposed blockchain network.

Using digital tools to meet the challenge of identifying and including unbanked people in the global financial system is what Libra and its supporters say is the project's greatest opportunity.

The scale of that mission is spelled out by Matthew Davie, chief strategy officer at Kiva, a Silicon Valley-based microfinance platform that is one of the Libra Association's founding social-impact partners.

"In terms of KYC requirements, there can be a step-ladder approach, based on the dollar magnitude or the Libra magnitude of an account, where it's a slightly lower barrier at a lower financial threshold and a higher one at a higher financial threshold."

"The things Libra brings together are not science experiments any longer. We are trying to take these mature approaches and place them in direct line of sight of financial regulators and policymakers. We are saying financial inclusion and regulatory oversight are not in competition; Libra presents a pathway for the world to move the needle at scale."

To be clear, when Libra Association members will develop their own wallets, those wallet providers must ensure compliance with anti-money laundering and counter terrorist financing requirements and best practices when it comes to KYC checks.

The question of how Libra will approach digital identity remains unanswered.

This snippet left experts in the digital identity space wondering whether Libra might have an entirely new take on digital identity and KYC, perhaps involving something like a Facebook profile in certain unbanked regions where government-issued documentation is scarce.