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Regulators Fight Back over Facebook’s Libra
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Last month, Facebook announced its much-anticipated plan to launch its own cryptocurrency called Libra.
The response from the crypto community has ranged from positive – this will amplify the adoption of all cryptocurrencies, some argue – to outright negative – we’re about to see the world’s first private central bank, others warn.
But recent tweets by Donald Trump indicate that it isn’t going to be smooth sailing for Libra. In the Tweet, Trump also stated that he is “not a fan of Bitcoin and other Cryptocurrencies, which are highly volatile and whose value is based on thin air”.
....Similarly, Facebook Libra’s “virtual currency” will have little standing or dependability. If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations, just like other Banks, both National...— Donald J. Trump (@realDonaldTrump) July 12, 2019
US regulators have made their stance clear regarding the tech giant’s proposed cryptocurrency that will be built on the Libra blockchain.
The chair of the US House Financial Services Committee has called for a hearing over Facebook’s plans, stating, “We’re now going to move and we’re going to move aggressively and very quickly to deal with what is going on with this new cryptocurrency.”
This comes after the US Senate Committee on Banking, Housing, and Urban Affairs announced it would hold its own hearing for Libra on July 16.
To add to the wave of opposition, US lawmakers have just released a draft bill titled “Keep Big Tech out of Finance Act”. The proposed bill states:
A large platform utility may not establish, maintain, or operate a digital asset that is intended to be widely used as medium of exchange, unit of account, store of value, or any other similar function, as defined by the Board of Governors of the Federal Reserve System.
Regulators and bankers have good ground to see Libra as a potential threat. If the currency is successful, it would allow millions of people around the world to bypass traditional banks and could result in Libra competing with national currencies like the US dollar.
A competition of choice
The narrative battle around Libra is about to get a lot bigger. Within the crypto community and without, lawmakers, corporates, and individuals want to know what this means for the future of the mainstream financial system.
People who are well-versed in crypto talk argue that Libra can hardly be called a cryptocurrency as it lacks true decentralization and censorship resistance. However, regulators are still grouping Libra alongside all other cryptocurrencies – which means that whatever is decided for Libra has ripple effects for the rest of the crypto industry.
One thing is certain: as more people are offered alternatives to mainstream currencies, regulators and bankers will have a hard time getting in the way. A few years ago, Bitcoin was still being lambasted as “fake internet money” – and as Trump’s Tweet shows, that criticism still exists. But Bitcoin has now snowballed into an attractive and legitimate investment for individuals and institutions.
Regardless of how Libra pans out, we can be sure that cryptocurrencies are about to receive a fresh wave of attention. If there’s one rule in narrative economics, it’s this: attention is always good.