An Overview of Facebook’s Libra as Seen by International Regulators
There’s hardly been a day for the last couple of months where Facebook’s new fintech venture “Libra” was left outside top-shelf discussions. Considering the few exceptions, mostly from Asian regions, international critics are not only strict with Facebook’s implementation in the global monetary chain, but also many times are in extreme opposition to the digital currency due to “unclear policies” behind the networking giant’s curtain.
In this article, we’ll be taking a closer look to how and why Facebook’s Libra token was created, why international financial watchdogs dislike Libra even more than Bitcoin, and how we got to the point where Libra is being discussed on a global scale, from European Parliaments all the way to G20 meetings.
So, let’s start from the beginning. Before Libra Association was founded, or the Libra currency was even conceived, Facebook went through a strict anti-crypto policy period, that disallowed users of the world’s largest social network to share, promote, or discuss cryptocurrency projects, more specifically ICOs, bounties, and mining pools, among other specifics.
To a certain extent, it made some sense, as it was just after the period we experienced the infamous Bitconnect crash and a series of other exit scams, whether in ICO stage or not, and let me tell you something: I think it was good. I think it was necessary, as at that exact stage the European Union and other monetary super-powers across the world started to take crypto seriously.
They (government bodies, central banks, financial regulators) started to create policy-making task forces, observatory groups, and regulations that would categorize each and every cryptocurrency project under a certain ribbon of tags, in order for blockchain technology and its operations to be understood and controlled by the political hierarchy if needed.
We’re lucky today as the chance of a scam ICO or unexpected “exit scam” of an existing altcoin is dramatically decreased if present at all. Thanks to the regulations we all hated in the beginning, as much as they hated cryptos.
To the point, why did Facebook suddenly have a ‘change of heart’ and rush to create its own cryptocurrency?
As time passed and regulators became more mature and confident within the blockchain realm, it was suddenly known all over the globe that blockchain technology is so much more than just an alternative monetary system and we just started to explore its true potential.
Suddenly people who would tell you Bitcoin is a bubble would ask you how to buy Bitcoin on the street, at work, even at home in some cases.
I mean if the government trusts it (until an extent, yes), why shouldn’t we, right? I assume that’s what most people thought of it back in 2018-early 2019.
When you see big corps, big pharma, hi-tech jumping on the train, followed by banking institutions, that so far have only barked at the sound of crypto, and then even the government? I mean you’d have to know this is not a joke.
Facebook realized, after investing a little time and effort into blockchain technology, what most of the world has done already. Blockchain offers a network of trust, where individual participants are part of the network on their own will.
A blockchain network, in opposition to a traditional man-made centralized network, has the ability to secure the integrity of a transaction, whether monetary, intellectual or other, in a decentralized, or “democratic”, some would say, fashion.
Simpler, it doesn’t require an authoritarian overseer, who would confirm, overwatch or manipulate the outcome of a transaction between two agreed parties, as seen fit by the third party. That’s the magic sauce of blockchain.
Now, in Facebook’s case, similar to Ripple (XRP), there is no magic sauce. At best there’s some old fashioned ketchup, where Facebook decides when, and if your transaction will be confirmed, under what rates, and who else besides Facebook was informed about this transaction while you were still filling in the value field.
“The Libra Association”
Yeah, I know, that sounds like a secret society or something, right? It’s funny how they choose the word ‘Libra’, which comes from ‘Freedom’, for one of the most “chained” platforms mankind ever experienced.
In a nutshell, the Libra Association is the centralized super-power behind Libra. It is run by the initial members, which include, but are not limited to Facebook, Uber, Lyft, Vodafone, and Paypal, among others.
The Association will be essentially controlling the total supply, circulation units, price per unit of Libra, and will pretty much have control over Libra, similar to the control central banks and governments have over fiat currencies.
Some analysts, such as Li Daokui, believe that Libra will be similar to the Chinese WeChat, AliPay, Tencent Pay, but even better, in terms of globalization. Pointing out Facebook has already a network of several billions of users on a worldwide scale, compared to its Chinese counterparts, which are still strong enough, but also extremely local-focused.
Facebook will be able to connect billions of customers and markets online regardless of their location, political, or financial system, which makes it naturally an instant target of traditional monetary power-brokers such as banks and governments.
In recent research, the Central Bank of Switzerland concluded that Libra’s documentation is lacking important information and noted its “extremely vague”. We all know how Zuckerberg likes to use fancy terminology for regulators to have a tough time understanding what he’s all about, and the fact that Libra is no different shouldn’t be a surprise.
But it is not just the unclear terminology and the already fat network of Facebook that threatens the modern political system, but rather the potential of a global financial meltdown that could be caused by such a ‘network of trust’.
Yves Mersch from the Central Bank of Europe believes that Facebook could manipulate the pairing price between a certain state-issued currency and Libra, and even regulate the demand or offer for a specific country’s national currency, making Libra a “Cartel-Like” operation, in his own words.
Furthermore, just recently, the Minister of Finance of France, Mr. Bruno Le Maire, stated that Libra could not work in the EU until concerns over consumer risk and governments’ monetary sovereignty were addressed.
“I want to be absolutely clear: in these conditions, we cannot authorise the development of Libra on European soil.”
Le Maire is one of the countless European politicians that are against the promotion and adoption of the Libra digital currency, and if Facebook won’t try to be at least transparent on a surface level, Libra will be hardly used in the Eurozone.
Finally, if you remember how this article started, you should also analogize the fact, that regardless of how “Strict” governments seem to be against something, hearing about Libra every day will eventually make it a thing on its own, as happened with Bitcoin, Trump, and all the good stuff the internet brought us.