Facebook may have to shutter plans for Libra Coin in the short term.
Since the announcement yesterday that Facebook is creating a cryptocurrency (well, two, actually) to be implemented into Messenger and WhatsApp, global regulators have already expressed their concerns. Some have gone further and are calling for the project to be halted in its tracks.
Chief among them is Democrat Maxine Waters, the chairwoman of the House Financial Services Committee, who demanded an immediate shutdown.
“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,” she said. But we all know how well that went last time.
Echoing her comments, Democrat Senator Sherrod Brown tweeted, “Facebook is already too big and too powerful, and it has used that power to exploit users’ data without protecting their privacy. We cannot allow Facebook to run a risky new cryptocurrency out of a Swiss bank account without oversight.”
This statement takes aim at Facebook’s use of a separate association to look after the development of the project and manage the financial data. Set in Switzerland, a respected hub for financial services and secretive bank accounts, it is not surprising this set alarm bells ringing. But how quickly can U.S. regulators come together to provide the oversight necessary for Libra Coin to operate globally? And which other countries will get a say?
Over in Europe, German member of the European Parliament Markus Ferber said the new currency could turn Facebook into a “shadow bank.” He added that this should, "Set off alarm bells for regulators."
Taking an even harsher line, French Finance Minister Bruno Le Maire said, “It is out of question’’ that Libra “become a sovereign currency.”
The problem appears to lie in a conjunction between two evils that governments are scared of. First, they want to protect citizens from having their financial data exposed to big business—something that Facebook’s blockchain lead David Marcus said the company is trying to prevent. Second, they want to protect their own national currencies, which are crucial for maintaining economic stability.
So, Facebook’s new coin threatens both our interests and theirs. And while one can be solved with clear regulation, there is no easy solution for the other. Global, private currencies will inevitably challenge sovereign, national currencies.
But while Facebook faces strict scrutiny and probable roadblocks from governments around the world, other, more decentralized cryptocurrencies are continuing to run. As Digital Currency Group CEO Barry Silbert tweeted, “This really makes me appreciate just how unstoppable bitcoin truly is."