Continuing criticism on Facebook’s libra stable-coin is causing investors to doubt the project. Libra has come under fire from governments and central banks, but it might be internal struggles that are the real problem. Paypal, Visa and Mastercard are among the companies that are in doubt over the future of libra.
Paypal didn’t show up at a Libra-focused meeting in Washington. That made them the only one out of 28 backers that missed the meeting. Facebook itself, Spotify, Uber, Coinbase, Visa, Mastercard and other companies were all there. According to the Financial Times the reason why Paypal missed the meeting was over concerns about Facebook’s ability to deal with the criticism. Paypal is especially worried about money laundering.
Apparently Paypal isn’t happy with the amount of work that has been done with regulators. Last month Paypal’s vice-president of investor relations Gabrielle Rabinovitch stated that ‘at the moment libra is just a very exciting idea’.
Regulations a fear for financial companies
The lack of progress on talking with regulators is also a fear for other companies active in financial technology. The criticism from governments and central banks on libra isn’t something that makes Visa, Mastercard, Stripe and – once again – Paypal happy. They are in doubt over signing up for the Libra Association, because they don’t want to anger regulators. According to Bloomberg insiders said that Facebook ‘oversold the extent to which regulators are comfortable with the project’.
Facebook doesn’t have the best track record when it comes to dealing with data privacy. They’ve been more busy selling private data after all. Facebook’s CEO Mark Zuckerberg sure has a lot of explaining to do. Before the end of January he needs to testify before the US House committee to talk about his digital currency.
The US House committee will probably want a lot of answers. This summer chairwoman Maxine Waters said that Facebook’s plans raise a lot of concerns about privacy, trading, national security and monetary policy. With its 2 billion users Facebook’s cryptocurrency project could influence consumers, investors and entire national economies.
Facebook will back the Libra project using baskets of fiat. Supposedly the company as enough dollars, yen, Singapore dollar, British pounds and euro to create billions of libra.
Central banks having been sleeping
Even though bitcoin has been around for ten years and a great variety of cryptocurrencies have been developed ever since, central banks have been sleeping. It took a company with 2.1 billion users worldwide to make central banks see the potential of cryptocurrencies. European Central Bank board member Benoit Coeuré said libra was a wake-up call for central banks.
After the announcement of libra several countries panicked and immediately said they would ban the cryptocurrency. France and Germany were among them. They even considered launching an European cryptocurrency. The chief economist from ING Bank thinks something like this will certainly happen. He said that central banks will issue their own digital currencies within three years.
Also published on Medium.