Facebook is scaling back its cryptocurrency project ‘Libra.’ Instead of trying to become the dominant global financial system, its new goals are less ambitious. Instead it will work as a layer on top of traditional fiat currency, much like Apple Pay.
The Libra Association said it had begun the process of getting regulatory approval for the payment network from the Swiss Financial Markets Supervisory Authority. To ensure that authorities around the world are on board, the Swiss agency is working with a “college” of regulators from over 20 countries. The association said it still aimed to bring the system live this year.
A good move by Facebook, in part because there was always going to be strong opposition to Libra. You might work with the government in some aspects, but you don’t mess with its money. And ultimately it’s still a way to compete with the likes of PayPal, Google Pay, and Apple Pay.c
I know that’s kind of a clickbait headline but it’s from a quote by Mastercard CEO Ajay Banga, who dropped out of Facebook’s Libra organization after “multiple red flags.” Emphasis mine:
One reason was Libra’s leaders wouldn’t commit to abiding by laws around knowing their clients, money laundering, and data management, he told the newspaper.
“Every time you talked to the main proponents of Libra, I said ‘Would you put that in writing?’ They wouldn’t.”
It was also unclear to Banga how Libra would generate revenue, stoking his fears that it would make money in unscrupulous ways. “When you don’t understand how money gets made, it gets made in ways you don’t like,”
Facebook profiting off of money laundering?
Andrew Orr and Bryan Chaffin join host Kelly Guimont to discuss Tim Cook’s comments about Libra and the IMF’s statement on cryptocurrency.
Tim Cook spoke with French newspaper Les Echos where he said that currencies should stay in the hands of governments, not private companies.
Economists at the International Monetary Fund (IMF) are calling on policymakers around the world to address the “notable risks” of privately-issued digital currencies, otherwise known as stablecoins. Facebook’s Libra is one such example. Should central banks issue their own digital currencies?
The two economists suggest that stablecoins could undermine financial stability, and that stablecoin users risk losing their money: “Whether stablecoins are indeed stable is questionable.” It depends on the safety and availability of the underlying assets, and whether they are “protected from other creditors if the stablecoin provider goes bankrupt.”
One of the worries is that technology companies don’t have the same consumer protection rules as banks do. I look forward to seeing how this will play out. I certainly trust banks more than I do Facebook.
Senior UK politician Damian Collins MP said the Libra digital currency suggests Facebook is “trying to turn itself into its own country.”
The Democratic majority on the House Financial Services Committee unveiled a Bill aimed at getting big tech firms out of finance.
U.S. Federal Reserve Chairman Jerome Powell said on Wednesday that Facebook Libra “cannot go forward” until serious concerns are addressed.
“Libra raises many serious concerns regarding privacy, money laundering, consumer protection and financial stability,” Powell said during his semi-annual testimony on monetary policy before the U.S. House of Representatives Financial Services Committee.
“I don’t think the project can go forward” without addressing those concerns, he added later.
Being pessimistic, I wonder if they are genuinely concerned about things like privacy, or just don’t want the competition.
A group of Democrats on the House Financial Services Committee wrote a letter asking Facebook to stop its Libra cryptocurrency plans.
Bryan Chaffin and Andrew Orr dig deep into the possibilities—for good and ill (mostly ill)—of Facebook’s new Libra cryptocurrency. They cover how it work, why Facebook went the cryptocurrency route, and what Facebook has to gain from the project. Spoiler, the answer is everything!