Regulators, politicians and other crypto players have all responded to yesterday’s unveiling of Facebook’s Libra project and suggested that the social media giant’s digital currency plans may face several challenges.
The primary obstacle for Facebook to overcome will be regulatory and a number of supervisory bodies were quick to issue a statement on the plans to develop a global stablecoin nand digital wallet scheme.
Bank of England (BoE) governor Mark Carney was less hostile than some other regulatory heads, stating that he was keeping an open mind but not an open door and would subject any venture to “the highest standards of regulation”.
“Anything that works in this world will become instantly systemic and will have to be subject to the highest standards of regulation.”
Carney added that the BoE will look at the Libra project “very closely and in a coordinated fashion” with other regulatory bodies such as the G7, the International Monetary Fund, the Bank for International Settlements and the Financial Stability Board.
But whereas the regulatory executives were circumspect in their comments, international politicians were more forthright in putting forward their opinions.
With France due to take charge of the G7 later this year, it was French finance minister who voiced the strongest opposition to Facebook’s ambitions. Bruno Le Maire told a French radio station that it was “out of the question” that Libra should become a global currency. “It cannot and must not happen,” he said.
German member of the European Parliament Markus Ferber warned that Facebook could become a “shadow bank” under its virtual currency plans. Regulators around the world have made great efforts in recent years to bring more transparency to the global banking system and to reduce the so-called ‘shadow banking’ market.
And in the US, members of the cross-party House Financial Services Committee called for Facebook to appear before Congress to explain Project Libra in more detail. The Committee’s chair, democrat senator Maxine Waters said: “Given the company’s troubled past, I am requesting that Facebook agree to a moratorium on any movement forward on developing a cryptocurrency until Congress and regulators have the opportunity to examine these issues and take action.”
Facebook remained diplomatic in its reply to politicians and regulators. “We look forward to responding to policy makers’ questions as this process moves forward.”
It was not just the policymakers that raised the issue of legal and regulatory challenges facing Facebook and its Libra project. Thomson Reuters legal technologist Peter Colin said that “the potential exists for claims pertaining to consumer fraud and investor protection to increased tokenisation of assets, to how to classify and regulate Libra (as well as Facebook and its role), to user privacy and surveillance concerns and to the money laundering concerns consistently present with cryptocurrencies”.
The most postive reception to Facebook’s announcement came, unsurpriisngly, from other firms working in the cyptocurrency and tokenised assets market. Crypto exchnage eToro’s cofounder and chief executive Yoni Assia desribed the news as “a seismic moment for global finance”.
He welcomed the fact that the blockchain on which Libra will be based is open source and decentralised but the biggest positive for the other crypto players is the legitimacy granted by Facebook’s move.
“We expect other tech giants to follow suit helping to realise the potential for blockchain to disrupt traditional financial services,” said Assia.
Meanwhile, cryptocurrency investment firm KR1 co-founder George McDonaugh also welcomed the arrival of Facebook in the cryptocurrency market as well as the potential arrival of other big tech firms looking to displace banks. “Facebook has built a global phenomenon through reinventing what we’ve come to understand as a user experience. What they’ve done with interfaces, they’re going to do with money, and in that arena, the banks don’t have a chance.
“Want a loan? Ask Zuckerberg, want a credit card? Ask Zuckerberg and everything will be at the click of a button on a platform that literally 30% of the planet’s population are using. Further, Libra could crush merchant fees and potentially solve major issues with card fraud.
“If that wasn’t enough, if Libra is successful in seeing widespread adoption, watch a slew of new coins come to market from the other Silicon Valley heavyweights. Money is the next frontier for the candy crushing, social networking leviathans and I for one would not want to be standing in their way,” said McDonaugh.
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