In June, Facebook unveiled an ambitious plan to create its own cryptocurrency called Libra, which will provide 2 billion users with access to financial services. The authorities around the world did not like this venture much, and they can reject the project.
What is Libra
To develop cryptocurrency, Facebook founded a separate non-profit Libra Association organization. It has 28 members, including Visa, MasterCard, Uber, and even Spotify. It is they who should be engaged in the creation of cryptocurrency.
Also, the social network created the Calibra project. It should create a crypto-wallet under Libra.
As for the cryptocurrency itself, Facebook, in fact, creates a stablecoin. That is, the Libra cryptocurrency will be provided with a basket of the most popular fiat currencies.
The social network has not yet presented the exact list of "lucky ones". But in one letter to US Senator Mark Warner, Facebook said that most likely among the currencies will be the US dollar, Japanese yen, euro, Singapore dollar and British pound.
At the same time, the social network refused to add yuan to its basket.
Stablecoin will be available to users of Facebook, Instagram, and WhatsApp. Users can use it to send money to each other and pay for goods and services inside Facebook services.
And this is a fairly large audience. According to Zephoria, in June 2019 alone, Facebook had 2.41 billion active users around the world. And this is quite consistent with the population of the two most "crowded" countries of the world – China and India (2.74 billion on September 9, 2019, according to official data from the authorities).
If you still add Instagram and WhatsApp to the audience, then the number of potential Libra users may well "surpass" the above countries.
Facebook sees this as a plus, arguing that hundreds of thousands of people around the world will have access to innovation and financial services. But the authorities have a completely different view. Indeed, such a scale can lead to the creation of a "mega-giant" that can compete with entire countries. Moreover, Facebook has far from the best reputation when it comes to the storage and use of user data.
And this is not to mention the threats of money laundering and terrorist financing. And therefore, regulators around the world literally turned up against both Libra and Facebook.
Authorities against Facebook
Perhaps the first to speak against Libra were the authorities of the Facebook country of origin – the USA. Almost immediately, they expressed concern about money laundering and terrorist financing through Libra, as well as the safety of the data of future cryptocurrency clients.
After half a month, Facebook representatives were called on the carpet to the Senate Banking Committee. David Markus, head of Facebook's blockchain development department, had to "puff off."
In fact, the senators reminded Markus of all the scandals related to Facebook, including the case of Cambridge Analytica, when a social network sold users data without their knowledge.
As a result, everything ended clearly not in favor of Facebook. Senators accused the social network of "repeatedly betraying the trust of people", and lawmakers do not know how to restore the sympathy of users to it.
Following this, hearings were held in the US House of Representatives, and the outcome there was similar.
In parallel, a bill appeared in the Senate prohibiting large private technology companies from issuing their own cryptocurrencies. So far the senators have not examined it.
But this did not end for us. Further on Libra, G7 countries spoke out, arguing that "Libra raises very serious questions about cryptocurrencies." British MPs have promised to open an investigation into how Libra can violate the rights of users using their data.
And although Zuckerberg said at the end of July that Facebook was ready to devote as much time as needed to solve problems with regulators, Libra's prospects are becoming foggy every month.
On July 30, Facebook, in a report to the US Securities and Exchange Commission, said that "there is no guarantee that Libra or any other associated product" may even be born. And all because of the tough approach of regulators.
Further more. In August, a group of lawmakers from the Senate and House of Representatives traveled to Switzerland – the country where the Libra Association is officially registered – to discuss Facebook cryptocurrency with local authorities.
The results were again disappointing for Libra. North American lawmakers said they still have doubts about "allowing a large technology company to create a private currency as opposed to a global one."
In mid-August, the European Commission opened an antitrust investigation against Libra. According to the authorities, this cryptocurrency could potentially lead to an "illegal exit of competitors from the market."
By the end of this month, the situation was so heated that members of the Libra Association began to think about abandoning the project. According to the Financial Times, citing anonymous sources, at least 3 members of the association want to distance themselves from Libra due to the tough approach of regulators. So far, this information has not been officially confirmed.
Autumn did not bring relief for Facebook. On September 3, Yves Mersch, a member of the board of the European Central Bank, said that Libra could undermine not only the Eurozone banking system, but also the regulator’s control over the euro. Therefore, regulators around the world should unite in order to minimize risks.
Following him, the head of the US Federal Reserve, Jerome Powell, argued that Libra must meet "the highest expectations in the field of regulation and supervision."
And this is only the beginning of the month.
Interesting in the section: Сryptocurrencies and democracy
Will Libra appear
Facebook certainly decided to do something that no one had decided before, releasing the Libra cryptocurrency. Thus, the social network challenged not only regulators, but in general, cast doubt on the need for authorities. After all, the issue and control of money is their exclusive function and duty.
Given the billion-dollar social network audience, Facebook has long surpassed most of the countries in terms of population. And therefore it is not strange that the authorities relate to the project with such fierce resistance.
On the other hand, almost all innovative technologies raise many questions among the authorities. But in an effort to protect themselves and citizens, they should not destroy progress, without which the existence of the modern world is impossible.
Editor: Alex Riabukha