Is Libra Running Into Trouble As Regulators Scare Off Early Backers?
One of the factors that lent most weight to Facebook’s Libra cryptocurrency plans when they were unveiled in June was the impressive roster of backers that had pledged at least $10 million each for a seat on the Libra Association board. Spotify, Uber, eBay, Visa and Mastercard are just a few of the big names seemingly happy to support a project with the lofty and admirable stated early aim of providing basic financial services to the world’s ‘unbanked’.
Of course, a quick look at the names hints at longer term, and the cynical might even suggest ‘the real’, motivation for supporting Facebook’s cryptocurrency. A cheap, convenient, secure and, most importantly, widely adopted, cryptocurrency would be a major convenience, and cost saving, for companies that take a lot of electronic payments. And despite Facebook’s pokerfaced attempts to pass Libra off as an endeavour of altruism, it’s also fairly obvious that providing basic financial services to low earners in developing economies is not the entirety of Mr Zuckerberg’s ambition for Libra.
But Facebook were as earnest as necessary and their corporate backers impressive enough to convince the wider world that Libra might well become the world’s first cryptocurrency to gain genuine mainstream traction. And that even if had potentially huge commercial value for Facebook – just about fair enough if profits were earned from something that had a net positive influence in the world.
The added social and political influence Libra could potentially give Facebook was more troublesome given the company’s patchy record on ethics. But we’d cross that bridge when we came to it and everyone deserves a second chance, right? Maybe Facebook’s personal data mistakes really were just mistakes and the company now want to do the right thing and be a force for good!
It’s undeniable that the big names seemingly happy to get involved with Libra gave the cryptocurrency project added gravitas. But now it is being reported that the backlash from politicians and regulators has ‘spooked’ some. The Financial Times reports that “at least three..privately discussing how to distance themselves from the project”.
EU antitrust officials have already opened an official investigation into Facebook’s Libra plans and other regulators including the SEC have voiced serious concerns. The Financial Times reports this has led to two big name original backers considering cutting ties. A third was worried association with Libra could result in unwanted additional scrutiny from the regulators who control their own business.
The hesitancy of Libra Association partners to put their necks out and support Libra publically is also said to now in turn be irritating Facebook, with the company feeling it is the only one ready to stand up for the project. The obvious criticism is that Facebook and the Libra Association members would have been wiser to open up discussions and communication channels with regulators before they made a public announcement two months ago.
The FT further reports:
“Data protection officials from the US, EU, UK, Australia and Canada this month released a strongly-worded statement over privacy concerns, while the project has also raised fears over the risk of money laundering, tax evasion and disruption to wider financial stability”.
It does very much look like Facebook underestimated the challenge of introducing a mainstream cryptocurrency. And while political voices have raised the worry the company is attempting to create a ‘crypto-mafia’ of companies with mutual benefit to thumbing their noses at the financial establishment and regulators, for now Libra seems to be getting far fewer public ‘likes’ from supposed backers than it had expected.
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