Facebook’s Libra landed with a splash. It’s since drifted into stormy waters. What Mark Zuckerberg might have seen as a simple way for his users to send and receive money online — governments and regulators have taken to a whole new level. Some have seen an evil plan to take over the world, or at least an attempt to dominate global finances.
Some US lawmakers have expressed skepticism about the Libra regulations project.
Others have told Facebook that they really shouldn’t be creating currencies. A few have even begun drafting bills that would outlaw reserve-backed digital currencies like Libra (and presumably Tether.)
The reaction abroad has been no more than sympathetic.
Britain’s Information Commissioner recently raised concerns about a company like Facebook. We know that FB has suffered several data leaks, adding financial information about its users to the data.
The company already possesses all the information about their client’s tastes, preferences, and friends.
Commissioner Denham’s concerns join reservations expressed by regulators from Canada, Australia, and the European Union. The EU’s antitrust regulator has opened a probe.
Recent reports suggest that the pushback is affecting. Some of the 28 members of the Libra Association are said to be re-thinking their $10 million pledge to help establish the foundation that will govern Libra.
It’s possible that other partners will follow and that the concern that Libra has generated will kill the project.
It’s likely too that Facebook is just the wrong company to manage digital currency. Facebook has enough power without adding global financial control too. But it’s also possible that the interest that Libra has generated from regulators is exactly what the cryptocurrency world needs.
Bitcoin started as a libertarian project, a way for people to conduct transactions free of political interference.
But that lack of oversight has given money launderers, fraudsters, and market manipulators a free-rein. FinCEN, America’s Financial Crimes Enforcement Network, says that it now receives 1,500 reports of suspicious activity every month relating to cryptocurrency transactions.
The result of all of that suspicious activity is that the public still doesn’t trust Bitcoin specifically or cryptocurrencies generally.
Currency investors understand that the value of the dollar or the euro is a measure of the demand for those currencies in international business. The price of the dollar rises when more enterprises are making dollar transactions.
But people don’t understand why the price of Bitcoin suddenly spikes or falls when so few real purchases are made using the coin.
As long as there’s a feeling that someone who knows more than they know can gain an advantage in the market, they’ll stay away. And that’s even before they start to tackle the challenge of buying Bitcoin, holding it securely, and finding a seller willing to accept it when they make a purchase.
For Bitcoin purists, the idea that cryptocurrencies might benefit from government oversight is almost blasphemous.
But if Bitcoin is ever to extend beyond speculators, early adopters, and true believers, it needs stability and transparency. Regulation has its problems, but it can bring predictability.
Holders of the currency can know that their assets will still be around in a year and won’t be devalued by a committee they don’t understand. They’ll be able to make transactions using a digital coin without being seen as money launderers or drug dealers. They’ll feel that the coin does have something behind it.
Libra might be coming under an attack strong enough to stop the project in its tracks.
Take a thought that the regulation and oversight the project leaves behind could well create precisely the kind of infrastructure that other cryptocurrencies need.