Facebook shifts its plans in light of regulatory inquisition and pushback from global bank institutions.
Facebook has announced plans to shift its currency offerings strategy with its Libra cryptocurrency project. After its introduction in June 2019, it ran into a wall of opposition. Lawmakers in the United States are the first to fire back.
The first issue brought to light was Facebook’s reputation in the eyes of the federal government and the body of law. Repeated missteps with data handling and user information have plagued the social media giant. These issues bring into question the trust of Facebook to be involved in running a global financial network.
Next, officials, particularly from inside national treasuries, that this could erode at the stability of their national currency. This sort of side effect could have critical consequences, far outside the financial world. Included in this, a foreign entity’s ability to use it as a manipulative tool against another nation. Especially since Facebook was already under heat from the infiltration by Russian-backed companies in 2016.
Then there’s the complex issue of anti-money laundering. Central banks and regulation officials have noted that this could become a hotbed of money laundering schemes. In response, this could lead an entity such as the U.S. Treasury to label it a security.
Since the new stablecoin is proposed to be backed by a selection of other national currencies, this could lead to it being labeled as a tradable financial asset. The regulatory restrictions and requirements for disclosure could bog the coin down, spelling it’s death as an easily used online currency.
To add to all this, many nations have already begun digital currency projects of their own. These central bank digital currencies, or CBDCs, have begun to spring up around the globe. Sweden, China, and even the European Central Bank have already announced plans to develop their own CBDC to solve the problem of global funds transfers.
Despite this, many at Libra and Facebook state their solidarity, and that the project isn’t meant to chase the national currencies out. In January at the World Economics Forum, Facebook executive and Libra co-founder David Marcus spoke to its ability to coexist with the central banks network.
“I want to really make that distinction between the network and the assets that are running on top of the network, which I think could be issued by many different entities whether it’s central banks or the private sector.”