Facebook’s Libra cryptocurrency falls under immediate regulatory scrutiny
After emerging from the wings, Libra immediately danced into the regulatory spotlight.
Lawmakers in the United States and Europe were quick to pass condemnation of the Facebook Libra cryptocurrency, and less than 24 hours after the big reveal, US Senator Maxine Waters called on Facebook to halt development.
"Given the company's troubled past, I am requesting that Facebook agree to a moratorium on any movement forward on developing a cryptocurrency until Congress and regulators have the opportunity to examine these issues and take action," she said in a statement.
"Facebook is already too big and too powerful, and it has used that power to exploit users' data without protecting their privacy. We cannot allow Facebook to run a risky new cryptocurrency out of a Swiss bank account without oversight," agreed Senator Sherrod Brown.
People were even more emphatic across the pond.
Libra must not become a sovereign currency, said French Finance Minister Bruno Le Maire.
"It can't and it must not happen," he said.
A German member of the European Parliament urged that companies "not be allowed to operate in a regulatory nirvana when introducing virtual currencies."
Oh, so now they're worried about crypto
At its peak, Bitcoin had about 1.1 million active addresses – that is individual Bitcoin wallets that were active on a given day. It plunged to lows of under 400,000 in 2018 and is now back to around 800,000.
Meanwhile, Facebook has more than 2 billion active (logged on in the last 30 days) users, and the Libra network's current launch partners bring billions more. Uber has about 100 million and Lyft closer to 20 million. PayPal adds 250 million. Meanwhile, Visa has its name on 3.2 billion cards around the world, which handled $10.2 trillion in payments across 110 billion individual transactions in 2017. All of them have signed on with Facebook's Libra Network.
One unexpected upshot of Facebook's entrance to the space is that it has spurred lawmakers into saying what they really think about all this crypto business.
The general attitude among central banks to date is that crypto is just a bit player, and that they have bigger fish to fry.
"I've spoken to the regulators and they very candidly say, 'Well, there isn't really that much value going on in the transactions, a lot of it is speculation. It's a very interesting innovation, let's let it roll and see what happens.' They’re not necessarily planning to let it continue to roll after it does well, but they're planning to sort of see where the innovations go," said Harvard economics professor Kenneth Rogoff at the Davos 2019 World Economic Forum.
And in Europe, the preferred way of accommodating disparate national approaches so far has mostly been to wait and see.
Anti-money laundering bodies have swung into action on cryptocurrency, as have consumer protection-oriented bodies such as the SEC, following the mess of ICOs in 2017 and 2018. But central banks haven't yet had to seriously contend with the idea of a global digital currency.
That changed very quickly with Libra.
It won't actually be launching until 2020, but it now has central banks and monetary authorities swinging into motion where they previously haven't been, potentially resulting in some rapid regulatory evolution in cryptocurrency.
Disclosure: The author holds BNB and BTC at the time of writing.
- Binance Venus, the Fourth Industrial Revolution and empowering the bottom billion
- Opinion: Australia cash limit bill moves to hit cryptocurrency, despite bad maths
- Recruit Holdings, a $50 billion tech company, makes strategic investment in Blockstack
- Corda “doesn’t perform well”, R3 engineers are reportedly saying
- Commonwealth Bank is putting biodiversity itself on the blockchain