Facebook has become a way of life for more than 2 billion users of the social media platform. The company has acquired other companies such as Instagram, WhatsApp and Oculus to further expand its presence on the Internet and the world of digital mobile technology.
Government Opposition To Libra
Table Of Contents
With that kind of pull, the announcement of its founder, Mark Zuckerberg that Facebook is planning to introduce Libra as its own digital currency had many people listening. Unfortunately, banking leaders, politicians, and even the President of the United States aren’t buying what Mr. Zuckerberg is selling.
Initially, industry analysts thought Libra would be another cryptocurrency in the mold of Bitcoin. Zuckerberg had used Bitcoin-associated terms such as “decentralized” and “blockchain” when discussing Libra.
Alarm bells started to sound when it was revealed that the value of Libra would be supported by a basket of global currencies and other assets. In contrast, Bitcoin’s value is supported by the U.S. Dollar. Facebook explained that supporting Libra with other currencies would make it more stable than Bitcoin.
Warnings For Facebooks Cryptocurrency
Financial experts are concerned that the ambiguous nature of Libra will give Facebook loopholes it can capitalize on and allow the company to assert its influence on monetary policy as well as on the economies of other countries.
For example, Facebook could offer Libra as an alternative form of payment to developing economies which are characterized by a high number of overseas workers.
Buying Facebook Cryptocurrency
As it stands today (17th of September 2019) you cannot buy Facebook cryptocurrency. The reason for this is it hasnt been offered as an ICO yet. Therefore anyone offering to sell you facebook libra is a scam.
Overseas workers are mandated to transfer money from their country of work to their homeland. These payments are called remittances and are subject to taxes, fees, and other deductions. The G-20 countries have agreed to address the problem of overcharging remittance fees. With Libra, overseas workers have an avenue to bypass these charges and send more payment to their loved ones back home.
Libra might offer a short-term solution for countries dependent on remittances but the financial experts fear that in the long-term, Facebook’s digital currency may lead to more questions than answers. To play a game of “what-if”, if Libra became very popular, it may disrupt the movement of the foreign exchange market.
Definition Of Libra Coin
Facebook needs to define Libra. Is it a cryptocurrency? Is it a financial instrument much like security or a stock? Is it an alternative form of payment? Upon close scrutiny, even Facebook’s own white paper does not accurately or directly define what Libra is.
In view of Libra’s vague characterization, its proposed launch is met with challenges from politicians such as U.S. Congressman Carolyn Maloney and U.S. President Donald Trump who wants Facebook to be subject to standard banking regulations.
For its part, Zuckerberg has stated that Facebook is willing to work with regulators to come up with an agreement before the company gets Libra off the ground. However, politicians and banking experts are wary of Facebook’s willingness to cooperate with the idea of regulating Libra.
Libra Coin Against Other Cryptocurrencies
The appeal of cryptocurrencies is that they are not subject to tight regulation unlike traditional financial instruments. If Libra will be covered by stringent regulations, it would fall under the category of securities such as bonds, stocks, and other tradeable securities.
Jerry Brito, Executive Director of Coin Center shares his opinion that Facebook may ask regulators to categorize Libra as a mode of payment with its digital wallet, Calibra, as the facilitator.
Calibra Facebook Digital Wallet
As a payment instrument, Facebook would have to apply for licensing in regions where it wants to offer Calibra. To do so would require the social media giant to prove that Calibra cannot be used to facilitate illegal activities such as money laundering or as a means to fund terrorism activities.
Brito adds that Facebook may also have to apply for licenses in countries where it can function as a trading institution. Failure to do so will tarnish the company’s image. In the end, Brito believes all the scrutiny and effort may not be worth it and Facebook may end up deep-sixing Libra in the interim.
For Lana Swartz, a professor at the University of Virginia, regulators should also look into the Libra Association’s monetary policies. Specifically, what would the Libra Association do in the even a financial crisis hits an economy which uses Libra? According to Swartz, central bank governors will move to stabilize the money supply but it would be unclear what the effect would be with Libra operating within the economy.
Another consideration for Swartz would be Libra’s extent of accountability in the international community. Which organization would monitor or regulate Libra’s movements?
Unless these questions are answered by Facebook, it may not succeed in launching Libra. And if Libra does get off the ground, politicians and central bank governors around the world will be hard-pressed to find ways to regulate the digital currency.