The Libra Project 3/3
On the 23rd of October 2019, Facebook’s CEO, Mark Zuckerberg, came before the Committee of Financial Services. The talking points of the 6-hour long hearing before the congressmen and congresswomen of the committee were the “Examination of Facebook and its impacts on the Financial Services and Housing sectors.” The reason for the hearing was the announcement of Facebook’s plans to launch a global payment system coinciding with the launch of a digital stablecoin, the Libra. This is the final blog regarding The Libra Project.
With Facebook/Calibra spearheading the project, some level of skepticism, pessimism, and controversy is expected. The FTC imposed a record-high $5 billion fine on Facebook for violating users’ privacy. Many senators are also worried that this might happen with Calibra. While Facebook said that it would not link financial data to user data, and for that reason created Calibra to specifically split the two data streams, users still have to trust Facebook/Calibra that it will not merge the two data streams in the future. During the hearing, David Marcus said that some data would not be shared with third parties without consent of the user.
These don’t have to conflict with each other. However, can the user take Facebook/Calibra’s word for it that it won’t monetize financial data, knowing that monetizing data is Facebook’s core business?
Banned from Germany and France
The French finance minister, Bruno Le Maire, has openly spoken out about the Libra project at the OECD global blockchain policy forum, saying:” I want to be absolutely clear: in these conditions, we cannot authorize the development of Libra on European soil.” Germany shared the same idea. Olaf Scholz, said in a joint statement with France that “France and Germany consider that the Libra project, as set out in Facebooks’ blueprint, fails to convince that those risks [risk to consumers, financial stability and even the monetary sovereignty] will be properly addressed.”
The United States shares the same sentiment. During both hearings there were more Senators, Congressmen, and Congresswomen cynical about the prospects of the Libra project. With most of the uncertainty coming from the power Facebook will hold if Libra becomes a global currency and with it the ability to destabilize the Dollar.
Apple CEO slams Libra
The project also received a slam from Apple’s CEO, Tim Cook saying that he believes that a currency should stay in the hands of countries and that he isn’t comfortable with the idea of a private group setting up a competing currency. From his words, one could infer that the Apple ecosystem will not inherently support Libra with Apple pay.
Libra was created to empower the unbanked, allowing people to use a financial system outside the incumbent system. It is meant to lower transaction fees and transaction speeds. The Libra would save the people that fall outside the financial system for a plethora of reasons. However, with the controversy surrounding Facebook, the problems beset regulatory oversight, and founding members leaving the association, it gets harder and harder to launch Libra.
Both David Marcus and Mark Zuckerberg have said that the Libra Association/Calibra/Facebook won’t launch Libra before all regulatory bodies are satisfied with the policies Libra has set up. This might prove to be the biggest obstacle that they’ve put up for themselves. Not only does the project have to appease different regulators from different parts of the world, it also has to solve conflicting regulations from different jurisdictions.
Libra planned to launch the currency in the first half of 2020; however, with this much push back, it does not seem achievable.