Financial Regulators have not been really forthcoming ever since the announcement by the social media giant to launch its own digital currency dubbed Libra. While most of the people in the Cryptoverse have pointed towards Libra launch as generally a positive development pointing towards a growing mainstream adoption, extreme skepticism by the big banks has raised concerns whether Libra will be able to launch on time or at all. Financial authorities don’t want the tech giants like FB to fill the current regulatory void with digital financial services.
The resurgence of the Crypto kingpin & the subsequent announcement of Facebook to jump in the digital payments space has begun to create an impact as the financial regulators, central bankers & even heads of states have started talking about the technology. Recent tweets by the U.S President Trump on Bitcoin & Libra, although negative ones highlight the point – why would you mention something if it is not important? Although Bitcoin has seen a significant correction from the highs reached on Jun. 26, 2019 – the tweet from the American President didn’t do any damage to the premiere crypto, at least for now. If at all, it might actually help BTC propel higher on account of getting noticed in the highest corridors of power.
Meanwhile, FB’s proposed digital currency Libra has gotten the policymakers scrambling, not because it is doing something revolutionary, rather it’s because a mainstream tech giant with following of over 2.5 billion might signal a massive disruption & a quick demise of the legacy financial system. Given that, however, concerns around consumer protection & data privacy are valid and need to be addressed beforehand, considering the shady track record of the social media giant on these issues. Keeping that in mind, let’s look at how the financial regulators & lawmakers have received & reacted at the news of Libra launch.
As if there was already not enough regulatory confusion over Cryptos among the U.S policymakers that Libra has opened a new can of worms for them. It has stirred a storm in Washington – with more than 30 groups demanding a halt to the project to deal till questions around privacy, money laundering, consumer protection and financial stability get answered. The same issue was also highlighted by the Fed Chair, Jerome Powell, during his semi-annual testimony before the House Financial Services Committee – saying Facebook’s (FB) Libra offering should “not go forward” without addressing these concerns. To address the problem, Facebook’s blockchain lead David Marcus, recently sent a letter to U.S lawmakers addressing these issues. Guidance & Clarity from the U.S regulators would be crucial for the success of the Libra project.
Meanwhile the central bank for the second largest economy is not taking things lightly around the launch of Libra. The director of PBoC (People’s Bank of China) research bureau recently announced that the central bank is actively looking into developing its own digital currency to counter Libra and the risks it poses to the stability of the financial & monetary system. Although Cryptocurrency trading is banned in China, PBoC was one of the first to study digital currencies in 2014.
The EU regulators have received the idea of FB launching a digital currency with extreme skepticism. French finance minister Bruno Le Maire talking about Libra said, “can’t and…must not happen.” While Markus Ferber, a German member of the European Parliament, talking on the same subject feared that Facebook could become a “shadow bank.” While UK’s Financial Conduct Authority (FCA) has said that it would not allow the social media network to launch its digital currency without extensive prior screening.
One of the biggest crypto markets, Japan seems less fazed with Libra’s launch with the country’s top financial regulator, The Financial Services Agency (FSA), satisfied with the information presented in the white paper of the proposed digital currency. The financial regulator has stated that since Libra will be backed by a basket of fiat currencies, it can’t be labelled as a cryptocurrency & therefore doesn’t expect any roadblocks for Libra’s approval.
Crypto Legislation which has been stalled in the Russian Parliament for months might be headed for an approval in the coming weeks as revealed by the deputy minister Alexei Moisseev. He further clarified that no special regulation for Libra would be issued. It would be treated the same way as other cryptocurrencies – “It will be possible to buy it, sell it, keep it, but not use it [to pay for goods and services].”
Under the strict regulation banning cryptocurrencies in the country, Reserve Bank of India (RBI), has made sure that Libra won’t be launching in the second most populous country in the World. A big blow for Facebook since India has a 200 million user base for WhatsApp alone – global messaging service owned by Facebook.
In related news, Turkey has unveiled the 11th Development Plan for 2019-2023, which includes the issuance of a CBDC (central bank digital currency) under the economic road map. It is unclear whether this was precipitated by the Libra launch, but the G-20 nation seems to be following in the footsteps of Russia, China & Iran who are actively pursuing the idea of issuing their own CBDCs.
Be it the revival of the decentralized crypto like Bitcoin or the launch of cross border digital payment system like Libra, it has provided a wake-up call for regulators, politicians and government bankers who believe this vision is plausible & that Digital currencies can no longer be ignored. I will leave you here with a nice infographic detailing everything about Libra.