We can’t say whether Zuckerberg had anticipated this or not, but Facebook’s Libra is facing stiff resistance not only from regulators but also from bankers and central bankers around the world. It has only been a few days since Facebook published its Libra whitepaper, and regulators in many countries have made it clear that they’re not going to sit back and watch the show. Germany, France, Britain, India, China – Facebook is suddenly in the eyes of monetary policy regulators everywhere. And now it turns out that it’s also facing stiff resistance in its home market too. While some US lawmakers had already asked Facebook to halt the development of Libra and testify before Congress on 17th of July, things have turned tenser now as Governor of US Federal Reserve has also thrown his hat in the ring.
That’s right. Jereme Powell, the Central Banker of Facebook’s own country, is also not very happy with Libra. Here’s what he said yesterday in a testimony to the US Congress:
“Libra raises serious concerns regarding privacy, money laundering, consumer protection, financial stability. These are concerns that should be thoroughly and publicly addressed. All of those things will need to be addressed very thoroughly and carefully, and in a deliberate process.”
Clearly, until Facebook has addressed the concerns of regulators in its home country, it won’t be allowed to go ahead with its crypto plans. We’ve also seen how our Economic Affairs Secretary Mr. Subhash Garg said that Indian government is not comfortable with private cryptocurrencies similar to Libra, and in European Union too the parliamentarians have called for scrutiny of Libra. French Finance Minister Bruno Le Maire has also called for the Central Bankers of G7 to prepare a report on Libra in its upcoming meeting in July. Bank of England Governor Mike Carney had also said right at the time of Libra’s launch that Facebook’s cryptocurrency will be subject to the highest regulatory standards.
Now, it seems that Facebook had guessed this opposition to a certain extent before starting the work on Libra. This may be the reason why company has not decided to go all alone in this new field – it has partnered with the leaders of payment industry (I.e. Visa, MasterCard, PayPal) and leaders of the modern big tech economy (I.e. Uber, Spotify, eBay etc.) for this ambitious project. But it’s not looking that even all these industry players with their combined efforts will be able to bypass the excessive scrutiny that governments around the world are planning for them.
And finally, even if Facebook and all its Libra partners somehow satisfy all the regulatory requirements to launch their project… they can not escape from one particular problem: the competition from banks! Both Commercial as well as Central bankers across the world have identified the benefits of blockchain technology and tokenization for international transfers, and they’ve lined up their own Libra-like projects after that. There’s a good chance that they can succeed over Libra in this new world of private cryptocurrencies because they control the money supply. They can curb the growth of any cryptocurrency at any point of time by reducing the money supply to that cryptocurrency through various restrictions. Who can know this thing better than us? In our country the Reserve Bank of India has done precisely this thing. And now there’s a chance that central bankers worldwide may do it at a larger scale to Libra at some point in future.
So it’s going to be an uphill battle between some of the largest tech companies, regulators and central bankers in the world. Let’s see how it goes!