Home Opinions Opinion: How Facebook’s Libra Can Make Regulators Act Faster on Crypto Regulations

Opinion: How Facebook’s Libra Can Make Regulators Act Faster on Crypto Regulations

Facebook might have announced its plans of Libra with great precaution, but the road ahead is not looking comfortable for it as regulators decide to take it on. Libra's announcement can fast-track the development of crypto regulations in many countries, including India.

June 20, 2019 21:07
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Ever since Facebook published its Libra whitepaper there has been a lot of debate over how good or bad it is. A good part of that debate is revolving around how will it affect the economies of various countries. And when economies are involved, how can regulators and governments be left out of the discussion! We also took some time to analyze the various aspects of Libra and how can it affect economies around the globe and how can governments react to it in response. Here we’re going to tell you what we think is coming ahead on the regulatory front with Facebook’s cryptocurrency project. Let’s get started:

Libra won’t (and can’t) replace the fiat currencies

First things first – Libra won’t, and it also can’t, replace the existing financial and economic system based on fiat currencies. It hasn’t been designed to do so. In fact, any private currency launched by a centralized corporation can’t replace the fiat currencies, as there remains a single point of failure in the form of a company that can be tackled by the governments to control – or even halt – the circulation of such currencies. Only something as decentralized as Bitcoin can have the desire of doing that.

However, it also doesn’t mean that fiat currencies will remain untouched from Libra’s existence. They’ll be affected significantly if Libra successfully penetrates among the masses. The real toll will be on US dollar, as it will lose its status of being the sole reserve currency for all international transactions. The remittance transactions will not need dollar anymore, as one will be able to do them free of cost in Libra. And the remittance market is quite big – in 2016 there were remittances of more $429 billion! Now imagine Libra capturing even 5% of this market… it can be a big enough blow to US government, which explains why they’re not very happy with the designs of Facebook.

US dollar not alone

But it’s not just the US government that will be affected by the launch of Libra. In some countries remittances account for as much as 20% – 30% of their GDP, and Libra can also give Facebook some serious power over the economies of these countries. This explains why regulators are concerned of Libra worldwide. For instance, French Finance Minister Bruno Le Maire has ruled out the question of Libra becoming a sovereign currency. Similarly, Bank of England Governor Mark Carney said that Libra will be subject to “highest standards of regulation”. Markus Ferber, a German member of European Parliament, warned that Facebook may become a shadow banker with Libra. He said:

“Facebook’s entry into crypto is a good reason for regulators to start working on a proper regulatory framework governing the rules of virtual currencies. Multinational corporations with giant user bases such as Facebook must not be allowed to operate in a regulatory nirvana when introducing virtual currencies.”

Our own country India is also not very different. The government has already not been very happy with Facebook’s approach towards fake news and data management, so we can expect some stringent requirements to be put in place for cryptocurrencies (especially centralized cryptocurrencies) if Libra arrives in India.

Conclusion

So clearly, it’s not going to be easy for Facebook to move ahead on the plans of Libra. The governments around the world will certainly not allow the social media giant to compete directly with them in the economic space, and in order to do that many of them will fast-track the development of cryptocurrency regulations. Many of those regulations may also not be favorable towards centralized cryptocurrencies to minimize the impact of Libra on global economic system. However, a company as wealthy and politically powerful as Facebook is certainly well-equipped to at least try what it’s trying to do. Now it will be interesting to see how successful it remains in its efforts.

Technology and business were my core interests, so it wasn't surprising that I got interested in cryptocurrencies, which operate at the intersection of both these things. Now I live my passion by trading cryptocurrencies and covering Cryptocurrency news. You can connect with me on Facebook to learn more about me. :)

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