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Facebook May Abort New Crypto in India, Will Testify Before Senate in the US

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Within hours of Facebook’s official announcement of its new crypto project Libra, the social media giant began facing an onslaught of critics, snags and concern.

Following a statement by Democratic Rep. Maxine Waters who chairs the House Financial Services Committee and joined a chorus of detractors wanting to pull the plug on Libra, the U.S. Senate Banking Committee on July 16 will call Facebook to testify at a hearing to answer questions and concerns about privacy, security, user protection and the full scope of Facebook’s project.

Facebook has disclosed that Libra will allow users on its platforms to send and receive the cryptocurrency as easily as email, effectively transferring money across borders – without a bank.

The Senate Banking Committee first reached out to Facebook last month when it submitted a letter, dated May 9th, requesting answers to pointed questions about Facebook’s new stablecoin.

“…it is important to understand how large social platforms make data available that can be used in ways that have big implications for consumers’ financial lives, including to market or make decisions on financial products or services that impact a consumer’s access to or cost of credit and insurance products, or in ways that impact their employment prospects. It is also important to understand how large social platforms use financial data to profile and target consumers.”

Libra, which is expected to launch next year, will have the potential to harness Facebook’s multiple platforms including Messenger, WhatsApp and Instagram, reaching 2.5 billion users, effectively and massively impacting the global payments industry through newly developed blockchain-based infrastructure that the tech giant powers and controls along with a consortium of major corporations.

Such centralized control, despite the release of the Libra whitepaper and assurances from Facebook that Libra will be governed by dozens of companies, has done little to assuage regulators who fear that Facebook is poised to establish a robust shadow banking system with billions of users upon launch.

CNBC reports that David Marcus, who oversees Facebook’s blockchain efforts, is expected to testify before the Senate, according to a source in Washington familiar with the matter.

According to a report by The Economic Times, Facebook would also face an uphill battle in India, one of the largest remittance-receiving countries in the world, where a source familiar with project Libra says that the new stablecoin will not be made available due to the country’s anti-crypto stance.

Reports The Economic Times,

“‘Facebook has not filed any application with RBI (Reserve Bank of India) for its cryptocurrency in India,’ said a second person aware of the matter. RBI did not respond to queries from ET.”

“’If Facebook were to design the Libra to be a closed system, only to be transacted on its network and not beyond, RBI should ideally be less concerned, since the coin does not engage with the external economy,’ said Anirudh Rastogi, founder, Ikigai Law, a technology-focused law firm. ‘If it is not meant to operate in a closed system, then it is exactly the kind of digital asset that concerns RBI. Regulations as currently drafted seem to indiscriminately apply to both the above examples.’”

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Released: Facebook’s Testimony for Senate Hearing on Controversial Libra Project

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Written testimony by David Marcus, Facebook’s head of blockchain, has been released.

Marcus is scheduled to be grilled by Congress on Tuesday and Wednesday at two separate hearings set by the U.S. Senate Banking and House Financial Services Committees, as lawmakers tackle the tech giant’s controversial digital asset Libra, its Swiss-based Libra Association and its quest to initiate financial services under its newly formed, FinCEN-registered subsidiary Calibra.

Much of the crackdown on Libra weighs on Facebook’s track record of mishandling user data and the company’s apparent “sprint” to launch its new digital asset without a full reckoning.

Marcus writes,

“To be clear, the Libra Association expects that it will be licensed, regulated, and subject to supervisory oversight. Because the Association is headquartered in Geneva, it will be supervised by the Swiss Financial Markets Supervisory Authority (FINMA). We have had preliminary discussions with FINMA and expect to engage with them on an appropriate regulatory framework for the Libra Association. The Association also intends to register with FinCEN as a money services business.

The Libra Association is similarly committed to supporting efforts by regulators, central banks, and lawmakers to ensure that Libra contributes to the fight against money laundering, terrorism financing, and more.”

Several factors are at stake. First, Libra’s 2020 launch date is expected to be impacted by the outcome of the hearings. Since Libra is a stablecoin pegged to a basket of fiat currencies, the U.S. Security and Exchange Commission could decide that it meets the threshold for regulation, just like an exchange-traded fund (ETF). If so, Libra could languish, becoming another blockchain-based product seeking approval, along with several Bitcoin ETF applications that have yet to be approved by the SEC.

Second, Libra may be subject to a new draft bill discussion designed to prohibit big tech companies from issuing a digital asset and engaging in the financial services industry.

Third, the hearings could impact the overall cryptocurrency market as perceptions equate a win for Libra as a boost for Bitcoin and crypto, with an unfavorable outcome indicating more friction between regulators and crypto-related products and businesses.

Marcus, however, is focused on maintaining control over Libra’s launch and assuring US lawmakers that Facebook has gotten the message and that it is prepared to act responsibly.

“In fact, I expect that this will be the broadest, most extensive, and most careful pre-launch oversight by regulators and central banks in Fintech’s history. We know we need to take the time to get this right. And I want to be clear: Facebook will not offer the Libra digital currency until we have fully addressed regulatory concerns and received appropriate approvals.”   

You can check out Marcus’s full written statement here.

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Facebook Crypto Haters Proposes Doomsday Bill; Bitcoin to Benefit?

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A “discussion draft” bill set out to spell doomsday on the dreams of many financial technology projects is making rounds on Crypto Twitter.

Unconfirmed yet unsettling, the “Keep Big Tech Out of Finance” bill proposes to “prohibit large platform utilities” from becoming a financial institution or getting affiliated with a person that runs a financial institution.” In the case of non-compliance, the violator in question would need to pay a fine not more than $1 million for each day of violation.“A large platform utility may not establish, maintain, or operate a digital asset that is intended to be widely used as a medium of exchange, unit of account, store of value, or any other similar function, as defined by the Board of Governors of the Federal Reserve System,” read the bill.

Facebook Libra Hearing on Tuesday

The draft surfaced ahead of a congressional meeting on the Facebook cryptocurrency Libra, scheduled on July 16. The U.S. House Financial Services Committee so far has reserved a strict view on the social media giant’s foray into the financial sector, with many members ordering it to halt developing it until further notice.

Officials of the US leading government and regulatory agencies feel the same. Last week, Federal Reserve Chairman Jerome Powell said in his congressional address that Libra posed severe concerns regarding money laundering and economy destabilization. Hours later, US President Donald Trump tweeted against the cryptocurrency project, iterating that Facebook would need to go through a rigorous regulatory procedure as banks do.

The new bill, nevertheless, clarifies that the government does not even want technology firms to compete with their commercial counterparts. Anthony Pompliano, co-founder & partner at Morgan Creek Digital, called out the unfair competitive advantage with a sarcastic “Wow,” adding:

“Unlikely to succeed, but this is the most bullish thing for Bitcoin I’ve heard in weeks.”

Bitcoin Trends Cautiously

The weekend price action in the bitcoin market is showing a cautious take at the investors’ end. The world’s leading cryptocurrency, which rose to its year-to-date high of $13,868.44 after Libra’s technical paper launch, now stands almost 18 percent lower. But as Pompliano stated, it is in for a ride to the upside.

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Bitcoin Price Trending Inside a Bull Pennant | Image Credits: TradingView.com

Bitcoin reportedly jumped almost twofold on rumors that Facebook Libra would boost its name and fame among the ordinary people. Investors jumped into it to speculate and, as typical in any market, exited it atop local highs to make an attractive interim profit. But as many believe, many of those investors would stay back in the bitcoin market, given a string of gloomy economic issues that lie ahead.

Facebook Libra’s dismissal by the US Congress, for instance, could project bitcoin as the only real cryptocurrency alternative that does not bend before political bullying. Subsequently, Trump’s open declaration about manipulating the US dollar rates in the future makes an entire use case for bitcoin, as noted by Jameson Lopp of CASA. The chief technology officer said on Wednesday:

“There’s one perspective that Bitcoin need not do anything else to become a global reserve currency: all it needs to do is nothing as it watches other systems inevitably fail under the follies of fickle fallible humans.”

Trump’s anti-bitcoin tweet on Thursday has furthered bitcoin’s popularity. People are finally speaking about it at dinner tables (its a personal experience). That makes a super bullish case for an asset that has been compared to Ponzi schemes, financial scams, and even rat poisons.

The Libra doomsday bill could set an example of how much control governments enjoy over an individual’s financial freedom.

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Dr. Doom Replaces Bitcoin Hatred With Facebook Hate

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The well-known Bitcoin hater, Nouriel Roubini – AKA Dr Doom – seems to have moved on from the leading cryptocurrency as he is now aiming his hate towards Facebook’s upcoming cryptocurrency, Libra. Following the announcement of the upcoming stablecoin, Roubini said that Libra is blockchain “blockchain in name only”.

Money Grabber

On top of this, the New York University economics professor argued that Facebook’s cryptocurrency was only designed as a money grabber for the social network to up profits. He goes on to say that Libra is a“monopoly scam” given that Facebook has billions of users all across the world.

Responding to a tweet from CoinDesk, Dr Doom said:

“It will start as a private, permissioned, not-trustless, centralized oligopolistic members-only club. So much for calling it “blockchain”. Like all “enterprise DLT” it is blockchain in name only and an monopoly to extract massive seignorage from billions of users. A monopoly scam”.

In another tweet, the economist warned of Facebook “ridiculous chutzpah” designs. According to him, the social network intends to use Libra to become the central bank of the whole world.

In a tweet from last month, Roubini said:

“At a time when Big Tech is coming under sharp legislative scrutiny coz of serious anti-trust concerns and all govs, even the US, want to crack down on these monopolies Facebook wants to become the monopolistic Global Fed without even a bank license. What a ridiculous chutzpah!”

Before claiming that Facebook was a ‘monopoly scam’ or ‘ridiculous chutzpah’, Dr Doom warned of the risk factor associated with Facebook’s cryptocurrency. Potential users of Libra from the United States might be turned off by a cryptocurrency that’s also linked to relatively unstable currencies from emerging markets, as an example

“Also as FB Coin linked to a basket of currencies there is significant currency risk for users whose main currency is dollar or euro or any other. Most consumers are local and think/pay local and dont want currency risk related to using a coin that is a basket of global currencies”.

So will Facebook’s Libra coin just be a cash cow or will it be a respectful project with real long-term goals? Only time will tell but hopefully, it will be the latter. Not only would it bring in some well-needed legitimacy to an emerging industry but it could see an influx of more enthusiasts and investment.

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