Regulatory
Pressure
It didn’t take long for Facebook’s future cryptocurrency
project to grab regulators’ attention. Unfortunately, much of that attention
was rather negative.
The French finance minister and a German member of the
European Parliament were among the first to react, calling for a discussion on
Libra. Moreover, both countries agreed to block the project, stating that “no
private entity can claim monetary power, which is inherent to the sovereignty
of nations.”
Months later, the situation surrounding Libra has gotten
worse, and it has brought attention to the cryptocurrency market as a whole.
G20 members were urged to articulate their positions on the matter, as
officials contended that Facebook’s project couldn’t respond to all regulatory
challenges.
Losing
Key Supporters
When it was first announced, the Libra Association had a
total of 28 members. Powerhouses such as MasterCard, Visa, Spotify, and Uber
were among the project’s initial backers. Unfortunately for Facebook, the
negative stance of regulators across the globe cast doubt over the project’s
future, and it subsequently lost important backers.
PayPal was the first major name to back out, and Visa,
MasterCard, and eBay followed shortly thereafter. The payment processing
company Stripe stepped back as well, and the Latin American payment system
Mercado Pago was next.
Scams,
Frauds, Legal Issues
Being a social media giant, Facebook’s cryptocurrency
brainchild brought notable attention to itself in other respects. Even though
the official announcement specifically stated that Libra would launch no sooner
than 2020, that didn’t stop scammers from taking advantage of consumers.
Calibra.com is the project’s official website; however, Libra coins were
purported to be sold to the public on another one.
More legal issues came from an Israeli insurance company
with the same name – Libra. They sent a notice to the social media giant,
claiming that they owned all rights associated with the “Libra” trademark.
Facebook responded by saying that they owned them, and referred to a different
trademark – “Libra Association”, which is a non-profit organization based in Switzerland
and owned by Facebook.
It will be interesting to see how the case turns out, as
it’s pretty obvious that the name of the cryptocurrency was intended to be
Libra, not Libra Association.
Facebook’s
History
One of the most important issues put forward by regulatory
watchdogs regarding Libra’s mission was users’ safety and private data. And
it’s safe to say that Facebook has a rich history of scandals, and it was even
fined $5 billion following its privacy war with Washington.
Facebook’s CEO, Mark Zuckerberg, testified before Congress
after the notorious Cambridge Analytica data leaks, and he even admitted that
the “right” regulations might be needed. The European Union took a stand as
well, creating the General Data Protection Regulation (GDPR).
It’s worth noting that Zuckerberg will testify before the
U.S. House of Representatives regarding Libra today.
Structural
Issues With the Cryptocurrency
In addition to all of the above, Libra has some inherent
structural issues in general.
Samson Mow, the CEO of Blockstream, pointed out that “Libra
can’t be everything for everyone, and it can’t be both open and closed at the
same time.”
His comments followed this statement from the Head of Libra,
David Marcus:
“We open-sourced it, and as a result it doesn’t belong to
us anymore. It now belongs to the community, and they will help build the code,
and we will relinquish control over both the codebase and network through the
process.”
This is in direct contradiction with another of Marcus’s
statements, that “wallets will enforce the sanctions that are led by our
national security apparatus and treasury.”
Marcus previously stated that people will be able to do
whatever they want to with the money, as long as they have “legitimate use of
the product.” Naturally, this means that the Libra Association could, in
theory, decide that a certain use isn’t legitimate and freeze users’ funds or
deplatform them entirely.
In other words, besides the regulatory pressure that
Facebook is currently facing, it appears that the general concept of Libra
needs a lot of work and polishing.
And if all of the above isn’t enough, Facebook itself
recently warned its investors that Libra may never launch.
Comments
Post a Comment