That didn’t take long – from India, to the US and Europe, regulators are pushing back against Facebook’s Libra cryptocurrency plans.
Within a heartbeat of the Libra cryptocurrency announcement,the world’s regulators began signalling: hey not so fast Zuck.
It’s one thing to tell the world about a global money launch,but quite another to get it out of the door.
Facebook’s problems are not so much in its particular brandof blockchain (or not blockchain) so much as the considerable roadblockpresented in the form of the global financial regulators and central banks.
But you also get the feeling that the financial authoritiesare behind the curve on crypto and we are at a wake-up call moment.
Financial Action TaskForce coming after Facebook’s Libra and all crypto
After much chatter about how to regulate crypto on Friday(21 June) the G7’s Financial Action Task Force (FATF) will present its fullrecommendations for regulating “virtual asset service providers” (VASPs).
The rules have allbeen finalised with the exception of the part about requiring Vasps to recordthe identity of senders and receivers of cryptoasset, which it was consultingon.
Presumably the bank-wire type rules will be included in the publishedrecommendations on Friday, despite the objections of those lobbying on behalfof the crypto industry.
That being so, the new rules could be a particularly onerousand expensive to comply with for crypto firms, especially regardingtransactions involving so-called privacy coins such as Monero (XMR), Dash(DASH), Verge (VXG) and Zcash (ZEC) but also with “ordinary” pseudonymous coinssuch as bitcoin.
It all comes to a head on 28 June at the G20 meeting inOsaka, Japan, when the financial regulators will have their own gatheringrunning alongside that of the political leaders.
There could be some market-impactingnews coming out of those deliberations.
But let’s get to the responses from the financial powersthat be to Facebook’s Libra.
US Senate Banking Committeeand House Financial Services Committee to both hold Libra hearings
In the US Facebook’s are turned out to be a red rag to abull.
First out of the blocks was the chair of the House FinancialServices Committee, Rep. Maxine Waters who said her body would conduct hearingson the social media giant’s plans. She called on Facebook to immediately ceaseany further work on the project.
“With the announcement that it plans to create acryptocurrency, Facebook is continuing its unchecked expansion and extendingits reach into the lives of its users. The cryptocurrency market currentlylacks a clear regulatory framework to provide strong protections for investors,consumers, and the economy,” Waters said in a written statement.
Activity on the US Capitol didn’t stop there.
The Senate Banking Committee has let it be known that itwill begin a hearing on Libra starting on 16 July.
According to Reuters, the committee had asked Facebook fordetails about the project in May.
Jerome Powell highexpectation on “safety and soundness” for Facebook’s Libra
And yesterday the chair the of US Federal Reserve JeromePowell was asked about Libra in his press conference following the sharing ofthoughts on interest rates and other matters that came out of the two-day policymeeting.
Asked if cryptocurrencies might impact monetary policy, Powellsaid “we are a long way from that”. He noted that Facebook had done “quitebroad rounds around the world with regulators, supervisors and lots of peopleto discuss their plans and that certainly includes us.”
He see the benefits of the that could have “largeapplication” but has high expectations from a safety and soundness andregulatory standpoint”. In his remarks he was saying he was echoing what Bankof England governor Mark Carney had already said, which we will come to shortly.
Staying with the US, hostility to crypto in Congress was inevidence last month when Rep. Brad Sherman said bitcoin and other crypto shouldbe banned.
His reasoning is that crypto could undermine the dollar andtherefore the economic power of the US: “An awful lot of our internationalpower stems from the fact that the dollar is the standard unit of internationalfinance and transactions… it is the announced purpose of the supporters ofcryptocurrencies to take that power away from us.”
Bank of England’sCarney demands “highest standards” for Libra
Over at the Bank of England, governor Carney, told the FT that regulators will need to be all over Libra like a rash.
Although he is “an open minded” about the project and seesthe benefit of its promised “free and instant” payments. He said theauthorities will need to look at it “very closely”.
Precisely because it would be likely to be on an exponentialadoption is Carney’s implied thinking, it will need to be “subject to thehighest standards of regulation”.
In a shot across Mark Zuckerberg’s bow, he said a launchwould not be greeted with an “open door” by regulators.
Carney said the Bank of England will be working with the G7group of leading industrial nations, the Bank of International Settlements,sometimes referred to as the bank of the central banks and the FinancialStability Board, which Carney chaired shared until last year .
French financeminister lashes out against Libra
Staying in Europe, French finance minister Bruno Le Maire is calling for central banks to look into Facebook’s plans, warning that it could become a “sovereign currency” and that this “must not happen”, he said in an interview aired by Europe1 radio. Read more on this in the EWN reports here.
German EuropeanParliament members warns on Facebook “shadow bank”
German European Parliament member Markus Ferber said Facebook’s Libra “set off alarm bels for regulators” and he worried that Facebook could in effect become a “shadow bank”.
Ferber sits on the parliament’s important Economic and Monetary Affairs committee.
Staying in continental Europe, Europe’s privacy chief,Giovanni Buttarelli the European Data Protection Supervisor told BusinessInsider that “any further concentration of personal data poses additional risksto the rights and freedoms of individuals — so the proposed launch of a digitalcoin (cryptocurrency) by Facebook will require careful scrutiny from severalenforcement bodies, including data protection authorities”.
The European Union has the toughest privacy rules among themajor economic blocs, enshrined in the General Data Protection Regulation(GDPR).
India says no to Facebook Libra
Elsewhere things are looking too good either.
India, which Bloomberg reported last year was a key target forFacebook’s crypto ambitions with its high number of unbanked individuals, isnot playing ball.
The usually well-informed Indian business news outlet The Economic Times, reported: Libra, the cryptocurrency to be unveiled by Facebook next year, will not be available in India, according to a person directly in the know, as current regulations do not permit use of the banking network for blockchain currency transactions.
Mark Zuckerberg explicitly mentioned the 1.2 billion unbankedpeople around the globe as the core initial target audience.
The unnamed person in the report is quoting saying: “Facebookhas not filed any application with RBI (Reserve Bank of India) for itscryptocurrency in India.”
However there has been no response from the Indian central bankand a Facebook spokesperson told ET “We expect Calibra to work on WhatApp andbe available globally’”
Facebook is going to need to go on a hiring spree for lobbyists for each of the jurisdictions it is looking to bring the service to.
Do you think Facebook’s Libra will get off the ground or be killed at birth by regulators? Leave a comment