Perhaps the most over-hyped crypto project to make headlines, Facebook’s Libra hasn’t even set a release date yet but has received an onslaught of praise and criticism from the crypto community and regulators alike. The rapid influence Libra has had on the blockchain ecosystem is staggering, causing established blockchain companies to rapidly accelerate their plans in order to be first to market and not let the tech behemoth’s planned foray into the space steal all the limelight, however warranted. Any such plans have yet to be nailed down and are not likely to come to fruition for the best part of a year.
Since the news broke, there has been a wave of industry announcements. Binance revealed an open blockchain project called Venus, which will focus on developing localized stablecoins on a global level while China’s central bank, the People’s Bank of China (PBoC) is reported to have fast tracked the development of its central bank-issued digital currency (CBDC) after Libra was revealed.
The youngest Bitcoin millionaire, Erik Finman similarly felt the industry aftershocks from Libra, launching crypto P2P payment app Metal Pay, which he referred to in a Twitter post as “the Libra killer”.
Regulators are human too
While the reaction from regulators was expected in the crypto space, it came about faster with Libra, as a company like Facebook stepping into the crypto space put the entire industry under the spotlight and heightened scrutiny. We actually feel this is positive as it will speed up the process of adoption and awareness towards blockchain technology.
Generally speaking, the natural human reaction to something we don’t fully understand is fear and rejection and we are simply going through that process. Think about the reaction of the guy riding his horse once he saw a car passing by for the first time. Now imagine that this guy was a horse wagon seller, the biggest one in town. The next phase is all about helping external parties to fully understand the technology and creating a legal framework to support it.
Nothing new to see here
The Libra concept is quite innovative from the standpoint of a huge company like Facebook driving it. The idea itself is something that humans have been researching for decades and was first widely adopted through Bitcoin, so nothing new here. There are still many issues to be addressed if we were to use a cryptocurrency as legal tender and a means of exchange. It is only a matter of time before a decentralized currency – whether a currency issued by Libra or a currency issued by a central bank – will be widely adopted. Which cryptocurrency will eventually achieve mainstream adoption? It’s simply too early to tell.
PayPal Cautiously Believes in Libra’s Potential Despite Regulatory Concerns
Paypal, an American centralized payments services company has made it clear that it firmly believes in the potential of the social media giant’s global cryptocurrency project despite the intense scrutiny of governments and central banks on Libra, as well as the regulatory bottlenecks surrounding the cryptoasset, according to a Channelnewsasia report on September 14, 2019.
More Work to Be Done
Per the report, Paypal, one of the heavyweights that make up the Libra Association, a consortium that will govern the Libra ecosystem and make vital decisions pertaining to it, has expressed concerns over the future of Libra, a digital asset designed to foster financial inclusion for billions of unbanked people across the globe.
Gabrielle Rabinovitch, PayPal investor relations vice president has revealed that Paypal’s participation in the Libra project is a non-binding commitment and a lot of work will have to be done for the Libra dream to become reality, rather than just a thrilling idea.
PayPal Belives Libra Has Huge Potential
Notably, Rabinovitch stated that Libra’s goal of enabling millions of unbanked people in various nations to gain easy access to financial services is in line with PayPal’s ambition to serve the underserved and democratize access to capital.
“So we very much believe in the potential of Libra,” Rabinovitch said.
Though it’s still unclear whether project Libra will go live in 2020 as scheduled, plans to create a global currency that could potentially rival traditional fiat money and displace economies, have however kept central banks, governments, and regulators on their toes.
As BTCManager reported on September 11, 2019, the United States Treasury Under Secretary of Terrorism and Financial Intelligence, Sigal Mandelker, has declared that Libra’s launch will not be authorized unless it complies with the Treasury’s strict regulatory standards checkmating money laundering and terrorist financing.
On the same note, central banks in various countries have been pointing their searchlights into Libra, as part of efforts to ensure the cryptocurrency does not empower bad actors.
The Swiss central bank says its dialoguing with financial watchdogs around the world concerning Libra, while Yves Mersch, an European Central Bank executive has stated categorically that Libra could undermine the Central Bank’s ability to set monetary policy.
That’s not all, French Finance Minister, Bruno Le Maire has also expressed similar concerns for Libra, hinting that Facebook’s cryptocurrency will not be allowed to operate in Europe.
Amidst this upheaval, Facebook remains unperturbed and the highly controversial tech big whale has pledged to do all it takes to make Libra work.
On September 12, 2019, reports emerged that Libra has applied for a payment system license from the Swiss Financial Market Supervisory Authority (FINMA).
Nick Szabo, ‘Libra is a Cryptocurrency in the Same Way That a Doll is a Baby’
Facebook’s Libra Coin has been all over the news the past few months as more tech giants invest in the network. However, many people in the cryptocurrency community are skeptical about the new stable coin, saying that Libra doesn’t have the properties that made Bitcoin what it is today.
Issues with Centralization
As many people have pointed out since the announcement of Facebook’s Libra, this new coin has a large number of differences versus Bitcoin. The network is controlled by a set number of high powered companies, completely opposite Bitcoin’s decentralized nature thanks to Proof of Work mining. On the Libra network, transactions will be confirmed by those companies with the funds required to become validators. With this structure, it could become possible for those companies to censor your transactions.
Nick Szabo, one of the earliest Bitcoin developers and the man behind the concept of smart contracts, has spoken out on Twitter regarding Libra’s status as an honest to goodness cryptocurrency.
Facebook refers to Libra as a cryptocurrency in its white paper, describing a blockchain-like structure secured by validator nodes. Companies like Visa, Uber, and Paypal have paid the $10M requirement to become validators on the network. However, this system is still centralized to the point where regulators could come in and shut everything down.
What Even is a Cryptocurrency?
The term cryptocurrency itself has changed in meaning over the last 10 years. When Bitcoin was the only coin on the block, the term was extremely fitting. It was a currency that was secured by cryptography. As more and more coins came onto the scene, the term still applied as most of these altcoins were, more or less, the same as Bitcoin.
With the rise of the token market, the definition of the term became slightly more muddied. Companies were launching their own tokens for various reasons, and they were still thought of as cryptocurrencies regardless if they were meant to be currencies. Tokens have central issuance and possibly inflatable supplies, making them notably different than many of the Generation I cryptocurrencies.
Now, as the community moves into the next decade, the definition of a cryptocurrency is becoming more and more debated. At what point does a network stop being a crypto-currency and start being a centralized PayPal-like network?
Facebook’s Libra to meet with global regulators on Monday
Facebook’s popularity among masses drove it to venture into crypto ecosystem, releasing the whitepaper of Libra. But the project has faced my bumps since its very announcement. Before the project could even take off, it faced backlash from policymakers from across the globe citing privacy concerns looming over Facebook. Libra representatives might get a chance to address these concerns as global regulators decided to meet officials from the Libra camp.
This is the first official meeting between Facebook and policymakers from across the world and is scheduled for September 16, Monday. Facebook will have to answer a plethora of questions regarding Libra and the threat it poses to financial stability, a matter primarily long ailing EU governments. Officials from 26 central banks including the Federal Reserve and the Bank of England, are reportedly attending this meeting.
The meeting will be taking place between Libra and Committee on Payments and Market Infrastructure, a Bank of International Settlements’ forum. Officials from Libra will be queried about its scope as a currency and design along with a report being filed for G7 finance ministers in October.
Due to existing issues with Facebook and Libra, the bar for regulatory approval has been set very high, warned Benoît Coeuré of European Central Bank [ECB] who will chair the meeting. The governments have expressed “strong concerns” over Libra and other digital technologies that have the potential to destabilize the financial system and undercut sovereignty of governments and central banks.
The project has faced severe backlash from France; French Finance minister, Bruno Le Maire asked EU to bar it as it risked undermining monetary sovereignty of governments with lack of regulations. He added:
“Under the current conditions, we should refuse the development of Libra in the EU.”
After expressing strong concerns France, which holds the rotating presidency of the G-7, organized a special group to investigate Libra and other stablecoins. As a part of the process, the group has sent a questionnaire to the company as a process to explore the coin’s impact.
EU vice-president Valdis Dombrovskis noted:
“There are certain concerns about financial stability implications. The risks need to be fully understood and the EU needs to act in a unified way.”