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Regulatory Tensions Threaten to Stall Facebook’s Libra
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Less than two months since reporting the launch of its own digital coin, Libra, Facebook is dealing with mounting regulatory hurdles that could threaten to stall the entire project.
In July, US lawmakers were swift to schedule hearings over the proposed “Project Libra”, with the chair of the US House Financial Services commenting:
“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.”
Soon after, a draft bill titled “Keep Big Tech out of Finance Act” was circulated. It’s contents did not beat around the bush:
“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.”
Threats from all sides
Libra is now facing potential opposition from regulators outside of the US, too. In July, Benoit Coeure, a board member of the European Central Bank stated firmly that Libra will not launch until regulators are satisfied. At a G7 summit on July 18, Coeure told Reuters:
“You’ve got to be safe, robust and resilient from day one. It’s not a learning process: either it works or it doesn’t.”
A recent document seen by Bloomberg indicates the European Commission is "currently investigating potential anti-competitive behaviour" related to the Libra Association.
Within the Libra Association, the uncertainty isn’t going down well. Libra revealed in June that it would be joined by 28 member firms who reportedly have signed a non-binding letter of intent to pay 10 million USD in order to become node validators on the Libra blockchain.
These firms include big names like Visa, Mastercard, Uber, Coinbase and Paypal. But a recent report by the Financial Times suggests that at least three of these 28 firms have expressed concerns over being linked with the project, and two of them have considered pulling out.
Many in the crypto community have expressed contempt for Libra calling itself a cryptocurrency as it bears very few characteristics of true decentralization and censorship resistance.
“Without being particularly obnoxious, I can tell you that the actual structure of Libra is pretty much lifted verbatim from the paper which Sandy Pentland and Thomas Hardjono and I published last year.”
A game of uncertainty
David Marcus, CEO of Facebook’s subsidiary Calibra, has remained ambiguous when pressed on whether Facebook will halt the project until US Congress enacts an appropriate legal framework.
In its latest quarterly report, Facebook warned investors that while it still expects to launch Libra in 2020, regulatory pushback is still a massive risk factor.
“... market acceptance of such currency is subject to significant uncertainty. As such, there can be no assurance that Libra or our associated products and services will be made available in a timely manner, or at all. We do not have significant prior experience with digital currency or blockchain technology, which may adversely affect our ability to successfully develop and market these products and services.”
Will Libra overcome the regulatory opposition it is currently facing? Facebook and its partners purportedly published their plans early on in anticipation of this kind of backlash. Whether they can achieve both compliance and success, however, is yet to be seen.